The COBRA Law: Portability of Group Health Insurance

The COBRA Law: Portability of Group Health Insurance

Most people have by now heard of the Cobra law and think they know what it says. However, there are several sections of the law, and each one covers a different class of persons. (For the entire COBRA law, please contact your senator or representative’s office, as they can usually send you a copy in the mail.

Participants in group medical plans are protected by this federal law (passed in 1985) that guarantees their right to opt to continue coverage under the same group plan. To be explicit, the terminated employee is not converting his group coverage to an individual certificate; he is continuing the group coverage. However, if the employee is terminated for reasons of gross misconduct, then he is not covered by COBRA. In other words, COBRA protects employees who are laid off but not those who are let go for cause, IF your employer has 20 or more employees.

*For the terminated employee, coverage is extended for 18 months, at a premium of 102% of the group premium to cover the extra handling.

*For the terminated disabled employee, coverage is extended for up to 29 months. For the first 18 months his premium will be 102% of the group premium; for months 19-29 his premium is 150% of the group rate. This group must meet the Social Security definition of total disability, which is very narrow.

*The dependents of the terminated employee may extend their coverage for 36 months, and their premium is 102% of the group rate for all 36 months. These dependents are those who lose coverage due to death, divorce, or in the case of a minor child, aging past the definition of a dependent.

*There are also provisions for a terminated or retired employee who becomes eligible for Medicare to continue the group insurance for three years.

*The employee’s hours are reduced so that he no longer qualifies: 18 months of continued coverage under the group plan (or 29 months if disabled).

*The employee dies: -- his dependents are covered for 36 months.

While this law was a landmark in giving employees some coverage in the event of job loss, it often gives employees a case of sticker shock when they are quoted the full cost of their premium. My advice is to take the COBRA plan right away, and take advantage of the time to shop around for a lower cost plan that will cover your priorities for you and your family.

Try to avoid a break in coverage at all costs because it will cost you dearly later on. If your break in coverage exceeds 63 days, the next insurer can deny expenses related to any pre-existing condition.