COBRA, an abbreviation of Consolidated Omnibus Budget Reconciliation Act is a 1985 US Law that gives workers and their families right to continue group health insurance offered by their employer in certain curcumstances such as loss of job, termination, divorce etc...
Either way, the total cost would still be far less than private insurance cost that employe choose to take outside.
Didn't get it ? Lets break it down.
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Why COBRA ?
In a typical scenario, employee has to work or give services to their employer and in return employer will give them wage or salary. In addition to wage or salary, employer also gives their employees health insurance benefit which includes Medical, Dental and Vision. Employees can also enroll their spouse and children into their employer provided health coverage protecting their loved ones too.
Whether it's for individual or family, health insurance has a cost associated to it which should be born by either employer alone or both employee and employer split the cost. It all depends on employer policy.
Either way, the total cost would still be far less than private insurance cost that employe choose to take outside.
How COBRA Works ?
Now, what if employee is terminated ?
In that case, Along with the job, they would also be on the verge of loosing this health insurance for them as well as their family and precisely that's when COBRA comes to their rescue and gives them right to continue their group health insurance for upto 18 months by paying the full cost as employer will no longer pay it's share. And this will be until they secure another job which offers them another gorup health insurance in which case the first one will be discontinued.
In that case, Along with the job, they would also be on the verge of loosing this health insurance for them as well as their family and precisely that's when COBRA comes to their rescue and gives them right to continue their group health insurance for upto 18 months by paying the full cost as employer will no longer pay it's share. And this will be until they secure another job which offers them another gorup health insurance in which case the first one will be discontinued.
Now Imagine COBRA wasn't there. In that case, this employee would either have no health insurance at all, or would force to go for a far expensive private health insurance.
Consider another instance when spouse, who is one of the dependents, get divorced. This will also lead to spouse loosing their health insurance but incidentlly, this is another instance when COBRA would help them save it. So COBRA gives the spouse, who is now divorced, the right to retain the group health insurance for upto 36 months by paying the full cost as applicable.
Consider another instance when spouse, who is one of the dependents, get divorced. This will also lead to spouse loosing their health insurance but incidentlly, this is another instance when COBRA would help them save it. So COBRA gives the spouse, who is now divorced, the right to retain the group health insurance for upto 36 months by paying the full cost as applicable.
COBRA Qualifying Events
So, on two separate events, Employee, upon termination, and Spouse upon getting divorced, used COBRA act to continue the group health insurance for a certain period of time. We call these events COBRA Qualifying Events which determine the period for which the eligible person can continue the group health insurance. Apart from what we already talked about,
There are few other qualifying events such as:
There are few other qualifying events such as:
- Reduction of Work Hours
- Loss Of Pay
- Enrolment to Medicare
- Ceased to be Dependent
And these events also ensure the extension of group health insurance to applicable individual for a cerain period of time.
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