In the health insurance world, COBRA is not a snake or a yoga pose. It’s an abbreviation for a law that gives employees the right to keep and pay for their workplace group health insurance for up to 18 months if they quit or lose their job or have their hours reduced.
It stands for Consolidated Omnibus Budget Reconciliation Act, a law passed in 1986 that contained the health insurance provisions, among many other things. This was important because before the Affordable Care Act became law, people with a pre-existing condition—such as cancer—could be charged more or be denied coverage when they tried to buy health insurance on their own. COBRA often became the only health insurance they could obtain. The ACA, also called Obamacare, outlawed those practices.
Employers with 20 or more employees on more than 50 percent of their typical business days in the previous calendar year are subject to COBRA. Primarily, if you are an employee, an employee’s spouse, or an employee’s dependent child and you were covered by a group health plan on the day before a “qualifying event” that would cause you to lose health care coverage, you could be eligible for COBRA benefits. The law also details other individuals who might be considered eligible in some instances.
Qualifying events for employees are:
- Voluntary or involuntary termination of employment for reasons other than gross misconduct
- Reduction in the number of hours of employment
Qualifying events for spouses are:
- Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
- Reduction in the hours worked by the covered employee
- Covered employee becoming entitled to Medicare
- Divorce or legal separation of the covered employee
- Death of the covered employee
Qualifying events for dependent children are the same as for the spouse, with one addition:
- Loss of dependent child status under the plan rule
COBRA can be helpful if you change jobs and your new employer has a waiting period before you can sign up for its health insurance.
You usually would pay significantly more for COBRA benefits than you did as an employee, because the employer typically pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. COBRA is usually less expensive than individual health coverage.
Today, however, the ACA marketplaces offer health insurance choices for those who don’t have insurance through work. If you lost or quit your job and don’t have your group health insurance any longer, compare the COBRA rates you are quoted against what you can buy on the marketplace to be sure you’re getting a price that’s right for you.