In my continuing series on being laid off, I thought I would talk about what I’ve learned about COBRA.
What Is COBRA?
COBRA (named for the Consolidated Omnibus Budget Reconciliation Act which governs it’s administration) is the system to retain your group health insurance after you leave a company. You always have COBRA rights regardless of why you were dismissed except in certain instances of gross misdemeanor (such as stealing), but few companies will try to enforce that since it requires a heavy burden of proof on the part of the company. So, even if you are fired, you still qualify for COBRA. The only circumstances where a company does not have to offer you benefits (other than the aforementioned gross misdemeanor) is if the company cancels all health coverage for all employees.
How Does COBRA Work?
Under COBRA, a company must allow you the option to continue your insurance at your own cost at no more than 102% of the cost they pay for the coverage (so no more than a 2% markup to cover administration costs). The company must notify you of your COBRA rights within 44 days of the event that qualifies you for COBRA (being laid off, fired, on maternity leave, etc.). You then have 60 days to respond with your election to receive COBRA benefits. On their COBRA notification form to you, they must provide the actual date you must respond by. If they don’t provide that date, they are not in compliance with the law. Your election must be postmarked no later than that date. After you make your election, you then have 45 days to make payment for all premiums up to that point.
How to Manipulate the System
If you have chronic health problems or require regular medications, and you have the money, you may want to just go ahead and elect your COBRA coverage. However, if you’re fairly healthy and you don’t think you’ll actually need coverage, you can put off making your decision for a while.
As I said above, you have 60 days to respond to your COBRA notification letter. You can wait until the last day, and mail you election form on that date (make sure it’s mailed early enough in the day to have that day postmarked). You then have 45 days to make your payments up to that point and coverage is retroactive to the end of your previous coverage.
If, in that time period, you don’t have any events that need coverage, then you can just let it go if you don’t want to pay for the coverage (or can’t afford to). If the company doesn’t receive your COBRA payment, then they’ll just not enroll you in coverage. However, if you have an event in the 105 day window (60 days notification and 45 for payment), then you can still be covered. So, if you have a car accident on day 100 and end up in the hospital for a day or two (or by some horrible fate – need an LA Bail Bondsman because you were at fault), just make sure you pay your premiums by day 105. You just tell the hospital that you have COBRA coverage pending, and they will usually hold charges pending your insurance information. This way you don’t have to actually pay for coverage of those 3.5 months unless it turns out you actually need it.
Pre-Existing Condition Coverage
Of course, if you have the funds to cover your COBRA, I do highly recommend that you take it, especially if you have pre-existing conditions. The law says that group insurance can only charge a pre-existing condition penalty for up to 12 months prior to the start of your coverage, but they have to credit you with any insurance coverage you had prior to that date that has no more than a 62 day break in coverage. So, if you were at your job and had group health coverage for a year or more, you would not be hit with the pre-existing condition clause on your new insurance if you didn’t have more than a 2 month break in coverage. So, if you have a pre-existing condition, and you don’t find a new job and get new coverage within the 62 day window, it might behoove you to elect COBRA coverage if you can afford it.
Remember, you might be able to get private health insurance cheaper than you can get COBRA. Always check with a local insurance agent to see if they can get a policy for you cheaper than COBRA. If you’re like me and have several chronic health conditions, that isn’t going to be possible. But if you’re young and healthy, you can get a fairly decent private policy much cheaper than your COBRA would cost. It never hurts to try anyway.
I am not an attorney or an insurance agent. This information is provided without warranty or guarantee. While I have tried to provide accurate information to the best of my knowledge, do not make your decisions solely on what I say. Check on-line (there are many sites covering COBRA coverage) and make sure you have the full information before making a decision.