Understanding COBRA Continuation Coverage Notices

The Consolidated Omnibus Budget Reconciliation Act (COBRA) insurance is an optional continuation coverage provided by your employer when you leave the job where you were covered under a group health plan. COBRA keeps you covered for a limited amount of time until you can replace it; it can be used for 18 months.

How Do I Know if I Will Receive COBRA?

Employers must notify you within a specific period if you qualify for COBRA continuation coverage. Once you receive the notice from your employer, you will have 60 days to elect the coverage.

Who Qualifies for COBRA?

If your employer had 20 or more employees covered under a group health plan, you may qualify for COBRA if you were provided with that coverage during your employment at the company. Likewise, if you had your family covered under the group health plan provided by your employer, they may qualify for coverage under COBRA. Qualifying events for the individual are those that would cause the loss of your coverage, such as voluntary or involuntary loss of employment outside of gross misconduct and hour reduction. Qualifying events for spouses include the above. In addition, a spouse can qualify if the individual who was covered under the group health plan qualifies for Medicare or dies or if the couple divorces or legally separates. Events for dependent children to qualify include the above and losing independent child status under the group health plan’s rules.

How Much Does It Cost?

COBRA continuation coverage generally costs more than what you were paying for your group health plan coverage at your place of employment. The reason for this is the fact that your employer likely covered part or all of your insurance fees. Once you are no longer employed, your employer, while offering COBRA to you, can charge you up to 102 percent of the cost for your continuation coverage, but you will still receive the group rate. This percentage includes the premium plus 2 percent in fees for administrative costs. COBRA continuation coverage is usually less expensive than individual health insurance.

The initial premium must be paid within 45 days of the qualifying event, and you will receive a notice detailing the amount of your payment. After the initial payment is made, you will have a due date with a 30-day grace period for each successive payment.

What Is Early Termination?

Your employer isn’t required to provide you with health coverage, in accordance with federal law. If your employer chooses to cancel their group health plan while you are covered under COBRA, it will terminate your coverage as well under the Internal Revenue Code rules. However, if the employer institutes a new group health plan, they have an obligation to continue your coverage with COBRA.

Furthermore, if your employer ceases business or doesn’t pay insurance premiums, the coverage will be canceled. Failing to make your payment for COBRA continuation coverage will also cause an early termination.

You will receive a notice regarding early termination of your coverage.

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