Choosing COBRA Insurance

COBRA is a program covered by U.S. federal law that allows workers and their immediate family, in certain circumstances, to maintain their employer-sponsored health insurance upon a change in employment or life status. The qualifying events include any loss of benefits in case of:

• The death of the covered employee
• Reduced working hours due to resignation, layoff, strike, medical leave, business slowdowns
• Separation from work for any reason other than gross misconduct
• Divorce or separation which terminates the ex-spouse's benefits
• Dependent child reaching an age at which they're no longer covered.

The length of time you may use COBRA depends very much on which event qualifies you for coverage.

Companies covered by COBRA include all companies that have a group health plan and 20 or more employees, except for churches, some church-related organizations, and the Federal government.

All medical plans that you can COBRA are required by law to give you written information on the plan, and must also give you a summary of material modifications to their health care plans when changes are made.

Drawbacks of COBRA

COBRA benefits are something you pay for. If you're used to your employer paying 80% of your health insurance premiums, the price tag attached to COBRA can be a real shock. By law, you will not be required to pay more than 102% of the original premium, but you will be paying the whole thing by yourself. For example, if your premiums while you were working were $40 a month and your employer was paying 60%, you'll be paying the full premium price -- that's $100 a month -- plus 2% over that, or $2, for a total of $102.

You also have to remember to pay your COBRA premiums yourself; they will no longer come out of your paycheck. And they will come out of post-tax dollars, which will make the premiums feel even higher. Be certain to keep all your receipts, by the way; you can claim COBRA payments as a tax deduction.

COBRA Options

You don't have to carry the exact same health plan through COBRA that you committed to while you were employed. Instead, you can opt for a single-only policy, a less expensive PPO instead of the HMO, or a high-deductible policy. Any policy available to you originally through your employer must be made available to you through COBRA.

Alternatives to COBRA

There are several things you can do instead of using COBRA:

• Purchase an individual health-care plan. Depending on your circumstances, this might be cheaper than the group plan you're trying to COBRA into.
• Join your spouse's work health care plan. If you're losing your coverage and you are the dependent or spouse of someone in a different group plan, you can special enroll in their plan. And if you choose to use COBRA instead, at the end of your COBRA period (you must carry COBRA until the period it covers is over) you can still enroll in your spouse's plan. For either of these options, you must request enrollment within thirty days of losing coverage.
• Use a state-sponsored insurance program, at least for children age 18 and younger. Most states have a free or low-cost insurance program for workers with relatively low income. Call your local health department with any questions.

There is an excellent brochure at the US Department of Labor website that describes COBRA and its benefits and rules. If you are interested in using this program, you should read their brochure for a full explanation of how COBRA can benefit you.

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