COBRA

COBRA Extensions & Law Importance

The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, is a law passed by the U.S. Congress and signed by President Reagan that, among other things, mandates that a health insurance program giving some employees the ability to continue health insurance coverage after leaving employment. COBRA includes amendments to the Employee Retirement Income Security Act of 1974 (ERISA). The law deals with a great variety of subjects, such as tobacco price supports, railroads, private pension plans, disability insurance, and the postal service, but it is perhaps best known for Title X, which amends the Internal Revenue Code and the Public Health Service Act to deny income tax deductions to employers for contributions to a group health plan unless such plan meets certain continuing coverage requirements. The violation for failing to meet those criteria was subsequently changed to an excise tax.

Although this statute became law on April 7, 1986, its official name is the Consolidated Omnibus Budget Reconciliation Act of 1985. Because of the discrepancy between the official name of the Act and the year in which it was enacted, some government publications refer to the Act as the Consolidated Omnibus Budget Reconciliation Act of 1986. The Act is often referred to simply as “COBRA”.

COBRA Health Insurance Plans

COBRA itself can be a dangerous form of health insurance because it ends.  If you are on COBRA it is important to investigate different options if you can whether it be an individual health insurance plan (hopefully from us) or getting a new job.  Many times after COBRA ends the insured is forced to go onto a conversion policy, which is a very expensive individual health insurance plan that can be up 2 or 3 times more than COBRA itself.  The only people who take these plans are those that can’t get individual health insurance or can’t form a group.  If you are a business owner you can instead elect a One Man Group.

 

American Recovery and Reinvestment Act

The American Recovery and Reinvestment Act (ARRA) is a program that, amongst other things, provided much needed assistance to those who have lost their employer-sponsored health insurance coverage, by subsidizing 65% of their COBRA insurance premiums for 9 months of the 18 months that COBRA is normally available to those eligible. You can view further details by reviewing the following fact sheet issued by the Department of Labor: COBRA Premium Reduction Fact Sheet.

In a nutshell, an individual who is terminated from their employment and is eligible for COBRA is subsequently eligible for premium assistance for themselves and their family, as long as they were laid off between September 1, 2008 and December 31, 2009. Now that the recession is “over,” there is no more ARRA assistance.

 

Do You Qualify for COBRA?

The following criteria must be met in order for COBRA to work for you:

  • You must be employed by a company with at least 20 full and part-time employees. Employment by a non-profit organization, private business, or government agency will also qualify.
  • You must enroll in the COBRA plan at least one day before the event takes place that will put it into effect.
  • You must have experienced loss of employment, cut hours resulting in lost medical coverage, or Medicare eligibility.
  • If you were part of a group plan, you may also be able to receive COBRA benefits.

And of course, there are exceptions. If you meet these criteria, you will not be considered for COBRA:

  • An employee who has been terminated for misconduct
  • Part of a company that went out of business

 

COBRA Premiums & Payment

Though a majority of employers cover a significant amount of their employees’ premiums, therefore you will owe the full cost up front upon COBRA application. The premium can cost double or quadruple the amount it did when paid for by your employer.

You will also have to pay any premiums you did not pay for during the 60-day decision making period. Insurance companies might also charge you a fee for the upkeep of your COBRA benefits. There is a 45-day period to pay after you sign up for COBRA, followed by a 30-day time frame to provide the monthly premium costs.

 

COBRA Resources

U.S. Department of Labor

Employee Benefits Services Administration

Internal Revenue Service

East Coast Health Insurance: 888 803 5917

 

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