COBRA and State Continuation – Frequently Asked Questions

cobra insurance

The thought of losing your health insurance coverage can be terrifying. Here are some frequently asked questions (FAQs) and their answers regarding COBRA insurance and State Continuation healthcare coverage:

What is COBRA insurance?

COBRA insurance is a federal law, passed in 1985, relating to healthcare insurance coverage. It’s official name is the Consolidated Omnibus Budget Reconciliation Act.

What is the purpose of COBRA insurance? 

COBRA enables you to avoid gaps in healthcare coverage by temporarily retaining your employer’s group plan coverage.

What is State Continuation? 

State Continuation is similar to COBRA but applies to businesses that employ fewer than 20 people. The cost of continuing healthcare coverage is usually paid for by the employee.

Why is it called State Continuation?

COBRA is a Federal program. State Continuation laws are separately administered by each state. Learn about your state’s insurance continuation laws or contact your state’s Department of Insurance for information.

How does COBRA work?

When you experience a “qualifying life event,” that causes the loss of your healthcare insurance, you have a minimum of 60 days to elect to continue the coverage. You pay for the insurance, and temporarily receive the same coverage as before the qualifying event.

What is considered a qualifying event?

Work or life events that result in a loss of coverage. Examples include:

  • Job loss (for reasons other than gross misconduct)
  • Reduction in work hours
  • Divorce or legal separation from the covered employee
  • Covered employee becomes eligible for Medicare
  • Death of the covered employee

Who is eligible for COBRA?

The following people are eligible for COBRA:

  • Workers whose employer is required to offer COBRA and who experience a “qualifying” life event that causes the loss of their healthcare coverage
  • Spouses or dependent children of an individual who qualifies for COBRA
  • Workers who participate in a local or state government-sponsored group health plan that is eligible for COBRA

How much is COBRA insurance?

The cost of COBRA insurance varies according to the plan; however, it cannot exceed 102 percent of the total cost of what employees still in the plan pay for the same coverage.  Total cost can include any portion of the premiums previously paid by the employer.

Does my employer offer COBRA insurance?

Most private-sector employers must offer COBRA if they offer a group health plan and employ at least 20 people for more than half of its business days. COBRA also applies to most state and local government sponsored health plans. The federal government, churches, and some church-related organizations are not required to offer COBRA.

What benefits are covered under COBRA?

Your employer must provide the same health plan coverage that is available to active employees and their families. This is usually the same coverage you had prior to the qualifying event.

How do I apply for COBRA?

After receiving your notification and COBRA election form, you have 60 days to review the notice and make a decision. Select the coverage(s) you need and people you want covered, and return the form.

Can I add additional coverage to my COBRA insurance?

No. You can only continue the coverage(s) you already had.

When must I decide to elect COBRA coverage?

Your employer must provide an election period of at least 60 days to make a decision regarding COBRA coverage.

When does COBRA coverage start?

If you opt for COBRA, coverage is retroactive to the date of the qualifying event.

If I waive COBRA coverage, can I elect coverage at a later date?

At any time during the election period, if you waive COBRA coverage and later change your mind, you can revoke your waiver and elect the coverage.

How long does COBRA coverage last?

For individual employees, coverage can last up to 18 months. Beneficiaries who meet certain requirements may qualify for an 18-month extension.

What happens when COBRA coverage ends?

When your COBRA coverage expires, you must find insurance coverage elsewhere. Options include: 

  • Enroll in your spouse’s plan
  • Shop for insurance on federal and state exchanges at Healthcare.gov
  • Visit your state’s Medicaid website to see if you are eligible for Medicaid

Can my COBRA coverage be canceled before the maximum time period ends?

Yes. A group health plan may cancel your coverage for the following reasons:

  • You don’t pay the premiums on time
  • The employer stops offering the plan
  • You or a beneficiary start receiving coverage under another group health plan
  • A beneficiary becomes entitled to Medicare benefits
  • A beneficiary commits an act (such as fraud) that would cause loss of coverage for a participant not receiving continuing coverage

If we have a child or adopt while on COBRA, are those children considered qualified beneficiaries?

Yes, as long as they are enrolled within 30 days of the birth or adoption. Either of these events can take place before, on, or after the date of the qualifying event.

My company closed and there is no health plan. Am I eligible for COBRA insurance?

No. You must be part of an active health plan to be eligible for COBRA. Union members may be entitled to continuing coverage depending on their collective bargaining agreement.

Are there alternatives to COBRA?

Yes, through private coverage, government-sponsored exchanges and Medicaid. Researching these options can help determine which one provides the coverage you need at the lowest cost.

For more information on COBRA, visit the Department of Labor website.

Since 2002, DataPath has been a market leader in COBRA administration software.

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