What is COBRA Insurance? A Complete Guide

If you lose your job, one of your main concerns might be your employer-based health insurance.

It’s difficult enough to lose your income, but losing any health insurance you might have can be disastrous.

Fortunately, there’s a way to keep your insurance even if you lose your job. 

The COBRA insurance program (Consolidated Omnibus Budget Reconciliation Act) is a way you can keep the same health insurance program you had at your job for as many as 18 months.

There are various advantages to being covered under COBRA as well as various disadvantages.

Here’s how it works and why you might use – or not use – COBRA for your insurance.

What is COBRA Insurance?

COBRA insurance is usually associated with job loss, but that’s not the only circumstance you can get it under.

You are eligible for it if you go through certain qualifying life events.

If the insured person becomes eligible for Medicare, divorces their spouse, dies, or has a previously covered child turn 26, they are also eligible for COBRA. 

COBRA can also be used if you have not lost your job, but your work hours have been significantly cut-thus, resulting in a loss of full-time benefits.

The coverage you get will vary depending on your circumstances.

How COBRA works

If you lose your job, your employer or your current insurer will give you the information you will need to apply for COBRA coverage.

If you applied for a particular insurance plan with your job, the health insurance company should have given you COBRA information with the documents you received about your benefits. 

You have 60 days from the day of your dismissal or other life events to decide whether you want to keep your current coverage through COBRA.

If during those 60 days you initially decide you do not wish to be covered under COBRA but later change your mind, you can still be covered.

Coverage 

Your insurance benefits shouldn’t change under COBRA; any coverage you had before should still apply.

In most cases, you will be covered under COBRA for 18 months after your job loss.

There are certain circumstances where COBRA coverage can be extended to 36 months.

These include enrollment of the insured person in Medicare, the insured person’s death, divorce, and a child aging out of the insured person’s coverage.

How to Apply  

To apply for COBRA insurance, you need to follow the steps given in your insurance plan’s Summary Plan Description.

You must apply within 60 days of your qualifying life event. 

If this is because you lost your job, your employer will usually notify your insurance provider, but under other qualifying life circumstances, you may have to notify the health insurance company about your COBRA coverage yourself.

Most health insurance companies have a broker you can speak to about COBRA eligibility in those circumstances.

Mini-COBRA Insurance

Some states have what is known as mini-COBRA insurance. These are individual state guidelines that may expand COBRA coverage beyond the typical federal limits.

COBRA in these states may last longer than 18 months or cover companies that would not ordinarily be covered.

If you want to find out if your state has a mini-COBRA insurance plan, your state’s health insurance or employment departments will be able to tell you about any differences.

Who Qualifies for COBRA?

Certain professions do not qualify for COBRA coverage.

These include federal government employees, churches and church organizations, and anyone who works for a company that employs 20 people or less.

People who are covered under COBRA fall into three categories: employees, their spouses, and any dependent children they have.

Employees

If you are the insured person in question, you become eligible for COBRA once you lose your job.

You may also be eligible if you have not lost your job, but your work hours have been cut to the point where your employer is no longer required to provide you with health insurance coverage.

Spouses

If you were or are married to the insured person, you are eligible for COBRA continuation coverage under several qualifying life events.

In addition to your spouse losing their job, you may apply if your spouse has died, you have divorced them, or they have become eligible for Medicare coverage.

Dependent children

Dependent children are eligible for COBRA insurance under the same circumstances a spouse may claim coverage.

They can also apply for coverage for themselves if they have turned 26 and are no longer covered under a parent’s insurance policy.

COBRA Pros and Cons

While you are automatically eligible for COBRA coverage if you lose your job or undergo other qualifying circumstances, you may not want to keep your coverage.

People who are COBRA eligible can go to the Affordable Care Act (ACA) Marketplace and choose a new health plan from those available. 

If you have chosen COBRA coverage but have ended that coverage early, you cannot choose a new insurance plan unless it is a period of open enrollment.

Suppose your COBRA coverage runs out outside of an open enrollment period, or the costs of your COBRA coverage suddenly increase.

In that case, you can go to the ACA marketplace and choose a new plan even if it is not an open enrollment period.

The decision to keep your old plan or to select a new one isn’t easy.

There are several different advantages and disadvantages to both.

Cost of COBRA

While COBRA insurance will keep you covered under your old plan, the premiums you pay every month may go up.

This is because your former employer typically paid a part of your premium, and you are now responsible for that cost. 

There may also be an additional administrative fee that is a certain percentage of your monthly premium.

Your taxes might go up because your previous health insurance premium will not be deducted from your income pre-tax.

COBRA eligibility ending

It is possible that your COBRA coverage can end before the 18 month period it typically covers. If you become eligible for Medicare, you are no longer eligible for COBRA.

You also stop being COBRA eligible once you get a new job with similar health insurance plans to those your previous employer-provided. 

If your old employer stops providing employee group health coverage, your COBRA coverage ends.

Finally, your COBRA coverage will be revoked if you stop paying your monthly premiums on time.

How K Health Can Help

To sum it up, COBRA is price but necessary for some people. If you want to know more about COBRA coverage, talk to a healthcare provider.

Did you know you can get affordable primary care with the K Health app? Download K Health to check your symptoms, explore conditions and treatments, and if needed text with a provider in minutes. K Health’s AI-powered app is based on 20 years of clinical data.

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