“COBRA” is a semi-scary term; you know it has something to do with insurance coverage after you leave a job, and it also might be poisonous. You’ve googled it, but there’s just too much information out there, and a lot of it is aimed at employers or HR directors. You’re an employee who has left, or is leaving, his position; what do you need to know?
The term “COBRA” comes from the Consolidated Omnibus Budget Reconciliation Act of 1985, the federal law which contains rules for benefit continuation, and the only time that a federal law’s acronym has sounded cool. COBRA applies to employers who have at least twenty employees actively at work for at least half of the work days in a year. However, many states – including Utah, where we’re located – have enacted their own laws covering benefit continuation for employers too small for COBRA to apply; those state continuation laws are often called “mini-COBRA,” which is distinctly less cool.
There’s a lot of overlap between COBRA and Utah mini-COBRA rules, so I’ll just address them together as “COBRA,” making [special note] when Utah mini-COBRA differs.
COBRA comes into play any time that an employee or a dependent involuntarily loses benefit coverage. That can be through a termination (quitting or being fired), a reduction in hours so you’re not eligible for benefits, a divorce which leaves the former spouse ineligible for coverage, a child turning 26 and thus being ineligible for coverage as a dependent, etc.
The COBRA law states that you can choose to stay on the health insurance through your employer (for this law, “health” includes medical, dental and vision coverage), but you would pay the entire premium, rather than your employer paying some portion as it did when you were an active employee. In most cases, you can stay on that coverage for up to 18 months [12 months for Utah mini-COBRA], although there are certain situations (such as divorce, or death of the covered employee) which will allow you to stay on the coverage for up to 36 months.
In most cases, when you are terminated from a job, your coverage will stay active until the end of that month. Within 15 days, either the employer or a Third-Party Administrator (TPA) to whom the employer outsources the COBRA administration will mail you a notice describing your COBRA rights: what coverage is available to you, what the cost to you will be, and when you need to respond.
If you’ve left your position to take one with another employer, the COBRA response deadlines can work in your favor, as you have 60 days from the end of the coverage to return the paperwork that says yes, you want to continue your coverage; your coverage is then reinstated to the date that they ended as an active employee. If you have another position now, and you’re in the waiting period before your new benefits start, you can play what’s called “the COBRA game.” Here’s an example:
Your last day at your old employer is May 15th. That coverage continues to May 31st, and the COBRA notice you receive gives a deadline of July 30th to “elect COBRA” (respond that you want to continue).
Meanwhile, you began your new job on May 22nd. The new employer has a benefit waiting period of two months, after which your benefits would begin on the first of the month thereafter. In your case, your new benefits would begin August 1st.
Let’s assume that you have no ongoing medications or treatments. The wisest option is to hold off on electing COBRA unless a medical issue arises — if it does, you can elect COBRA and have your reinstated coverage effective back to the date that you lost it. If not, you’ve saved two months’ premium.
A few other notes before you ask:
- You don’t have to elect COBRA for every benefit you previously had. You may have had medical, dental and vision benefits; you can decide to continue any one of them without the others.
- You don’t have to elect COBRA for every dependent who had coverage before. For instance, let’s say that your spouse has employer coverage available, so your spouse and children switch to that coverage when you lose coverage through your employer. But you see that it’s cheaper for you alone to stay on COBRA coverage rather than switch to your spouse’s employer plan.
- However, if you have multiple medical plans etc. available from your old employer, you do have to stay on the plan you were on as an active employee.
- Either your old employer or the COBRA TPA will collect your premium; they’re also allowed by law to charge an extra 2% to cover their administration. And yes, they can terminate you for non-payment.
- If you lose coverage because your employer discontinues its benefit plan or closes its doors, you can’t elect COBRA coverage, because there’s no employer plan for you to continue enrollment in. However, if you now have no employer-sponsored coverage available to you, you could be eligible for a subsidized individual plan through Healthcare.gov. We also have access to very inexpensive “short-term medical” plans, which are especially designed to fill those brief gaps for healthy individuals.
