Understanding federal COBRA insurance regulations and cost
COBRA insurance was created by the federal government in 1986 to help protect individuals and families when someone lost, quit, or retired from their job. Before the law was created when someone lost their job, they immediately lost health insurance and many people were left to deal with expensive medical bills or go without health care at all. With the creation of the COBRA insurance law, people who met the federal criteria could keep their employer sponsored health insurance plan for normally up to 18 months. This protected families and gave them time to find new health insurance.
Let’s start with the basics about what COBRA insurance is. First, COBRA insurance is a law not an insurance policy or plan. COBRA insurance, the law, lets you keep your health insurance plan after losing, quitting, or retiring from your job. With COBRA, you maintain the exact same health insurance you had with your employer. That translates to the same doctors, same prescriptions, same co-payments, same deductibles, same everything. Similarly if the company changes their health insurance plan in anyway, you experience the same changes and have the same options on COBRA insurance.
The main difference between having your health insurance with COBRA and having it as an employee is that you are responsible for the entire cost when on COBRA. This normally doubles, triples, or even quadruples the cost. Why? Because most employers subsidize, or pay for, up to 90% of health insurance costs. On COBRA insurance you are responsible for paying the entire premium yourself plus a 2% administration fee.
Signing up for COBRA insurance is actually a relatively easy process and is normally done through your former employer and health insurance company. Within 30 days you should receive a COBRA insurance election form from your employer. If you do not receive one ask for one through your HA department or whoever handles your health insurance. Once you have the COBRA insurance election form, you have 60 days normally from the date on the election form to decide if you want COBRA. If you do, simply fill out the form and mail it in with a premium payment. Make sure to include everyone who you want insured on the form. Also note that COBRA insurance is retroactive to the date that you initially lost health insurance once you pay your premium. That means that any health care you paid for out of pocket during that time can be reimbursed.
For many people the cost of COBRA insurance is prohibitive and makes it impossible to even use COBRA insurance as an option. For people in that situation there are other options out there for health insurance. The most common are private health insurance plans and many people also look at governmental health insurance plans.