Learn about affordable health insurance plan options if you are eligible for COBRA. If you lose your employer-provided medical coverage, there are several continuation options to consider before you select a policy for yourself and your family, and discrimination against employees is prohibited. We review your HIPAA rights and Marketplace options, so you can obtain quality healthcare benefits at the lowest available rate before the deadline expires. Mandated coverage is guaranteed, with pre-existing conditions covered, and federal subsidies available, if you qualify.
The Consolidated Omnibus Budget Reconciliation Act provides workers and other family members the option to choose medical benefits identical to coverage they previously received through their employer. 102% of the cost of the plan will be charged, and 18 months of benefits can be utilized. 2023 Federal Marketplace plans may also be offered. Typically, group health plans provided by employers with 20 or more workers will offer this type of coverage.
Spousal, former spouse, and dependent coverage is also available, along with several ancillary benefits (dental and vision). Benefits are available immediately, and can be canceled at any time by the principal covered member. If elected, federal subsidies are not offered to reduce the premium. However, you can apply for Medicaid at any time. If you voluntarily terminate benefits outside of the Open Enrollment period, an SEP exception will not be granted. Off-Exchange and non-Obamacare plans will be offered, but some benefits may be limited.
Losing your job also qualifies as an SEP (Special Enrollment Period). This event allows you to choose a single plan (individual or family) without medically qualifying. You also become eligible for federal subsidies as long as you meet citizenship and other general requirements. You may also qualify for “cost-sharing,” which entitles you to purchase a Silver-tier policy with lower deductibles, copays, and maximum out-of-pocket expenses. Depending upon your household income, $0 deductibles may be available, along with $0 copays on primary-care physician office visits. Specialist visits typically have much higher copays.
COBRA And Medicare
COBRA and Medicare benefits can work together, depending upon which coverage is considered primary. Persons that have qualified for Medicare often can obtain COBRA benefits. However, if you are already receiving benefits from COBRA, typically, Medicare is not offered. A spouse and dependents may retain COBRA for as long as 36 months, regardless if Medicare has been elected. Dental benefits may also be kept, since they are not offered by Medicare. Private single and family dental options are also available.
Applicants can apply for COBRA benefits (when eligible) if they are receiving Medicare Parts A and B. In this scenario, Medicare is considered the primary coverage since most expenses will be paid by this coverage. It is important to understand that COBRA is not considered as qualified coverage from active employment. Thus, you can be charged late penalties and charges if you miss the enrollment deadline. Note: If eligible for Medicare as a result of End-Stage Renal Disease, COBRA benefits are considered “primary” during the 30-month coordination period.
It is also possible that Medicare benefits may be offered if you have reached age 65 and meet certain requirements. If you miss the 30-day deadline, several options will be available, although all “essential benefits” may not be included, and pre-existing and existing conditions are not likely to be covered.
If you worked for a private-sector company with 20 (or more) employees, or you were employed by a federal or government Agency, you should be eligible. Federal government and Church employees are typically not eligible. Also, at the time you left the company, you would have had to be covered under their Group plan. Your new policy would be identical to the coverage you previously had. Ancillary products, such as dental and vision benefits, should also be offered.
Typically, the rate you pay (dental and vision) is lower than purchasing a comparable private plan (dental and vision only). You may also cancel coverage at any time. Covered benefits include outpatient and inpatient hospital expenses, ER, doctor and specialist care, surgery, anesthesia, and major medical care, prescription drugs, dental and vision care, maternity, and preventative care and procedures. Also, waiting periods for major procedures may be shorter under COBRA when compared to a privately-purchased plan.
Plans sponsored by local and state governments are also eligible. However, federal government plans do not qualify. Churches and many church organizations also do not qualify. Christian health sharing medical plans are generally not affiliated with local churches, and their plans should be closely scrutinized before purchasing. There is no guarantee that funds will be available or utilized to pay your medical bills. Several religious health sharing companies have been investigated by state insurance departments.
If you qualify for Medicaid, Medicare, or a substantial federal subsidy, selecting COBRA may not be the best choice. Note: You are not required to pass a physical to qualify for employer-provided group coverage. However, you may “opt out” of benefits and purchase a private plan, although a federal subsidy will likely not be offered. A new employer may also provide new Group benefits, which will eliminate the need for COBRA. Coverage through your spouse’s Group policy may also provide an additional option.
Consolidated Omnibus Budget Reconciliation Act
The Consolidated Omnibus Budget Reconciliation Act of 1985 has protected millions of Americans, and saved individuals and families significant amounts of money by offering to continue their group healthcare coverage up to 18 months. Children, spouses, and ex-spouses are also eligible to purchase benefits (sometimes as long as 36 months), although the continuation policy may be more expensive than the work-provided policy since there are no employer-contributions. However, if you are eligible for a federal subsidy, purchasing private coverage may be less-expensive. You will be able to view different copays, coinsurance, and deductibles.
You may be required to pay a 2% administrative fee, which covers related expenses to converting to your own plan. However, if you are covered under the 11-month disability extension, the premium may be increased by up to 50% (extension months only). Also, a Federal Income Tax Credit (HCTC) may be available for reimbursement when you file your taxes in specific situations (example – negative effects of global trade). Eligibility for COBRA benefits will not impact your subsidy for Marketplace plans.
You are provided ample time to apply for continuation coverage. During this time, coverage will be backdated to coincide with the date you terminated employment. During this election period, you are encouraged to also review and compare available Exchange plan options available in your state. You may keep the policy for 18-36 months, depending on your qualifying event. Since most COBRA situations are the result of employer-termination, the resulting benefit period is 18 months. You are not required to keep benefits for the entire 18 months.
Private-sector companies must adhere to ERISA (Employee Retirement Income Security Act of 1974) guidelines. Requirements include having to offer a specific tier of healthcare coverage, although adhering to ERISA regulations is mandated. NOTE: To obtain COBRA benefits, your previous employer had to be COBRA-eligible, only beneficiaries can obtain coverage, and a qualifying circumstance/event must take place. Additional assistance is provided by the Departments of Labor and Treasury, along with the Department of Health and Human Services.
How Much Time Do You Have To Elect COBRA Coverage?
Although the number of days can vary, depending on the specific plan time limits, but the minimum is generally 60 days. Your “election period” begins when you officially lose benefits or receive the election notice (whichever is later). Also, each qualified applicant can choose to accept or reject coverage, regardless of the decision that a spouse or dependent makes. Thus, it is possible for one spouse to elect COBRA benefits, while the other spouse and children choose to purchase an Exchange plan. It is also possible that one member of the family may be eligible for Medicare, while other family members have not yet reached age 65. Non-ACA plans may also be elected.
Typically, if your job position was terminated, or you were a victim of reduced hours, you are offered 18 months of benefits. This applies to the employee, his/her spouse, and all qualified dependents. The number of months increases to 36 if you are entitled to Medicare, or if the death of the covered employee occurs. Divorce or legal separation also qualifies for 36 months of coverage (spouse and/or dependent children). During the election period, if you decide not to accept coverage, you can later reverse your decision, and obtain benefits, if the election period has not ended. Coverage is typically available to private-sector workers for companies with more than 20 employees.
If eligible for readjustment allowances, a second opportunity may be granted. NOTE: Federal employees receive coverage, but not from COBRA. Information can be obtained from their personnel office. Note: If an employee was fired or terminated for “gross misconduct,” it is likely that benefits will not be extended. However, alternative options (Marketplace, short-term, and non-insurance) policies may be offered. Medigap plans may also be offered if the applicant is Medicare-eligible. $2 trillion was allocated for this piece of legislation.
TAA (Trade Adjustment Assistance) allows qualifying persons to obtain continuing coverage. TAA occurs when a worker loses their job because of foreign trade. The program provides help with training and education, so a new job can be found. Governors of each affected state and the Secretary of Labor administer all benefits and services. Additional help is provided by the US Department of Labor’s Employment and Training Administration’s Office of Trade Adjust Assistance. Once a submitted petition has been approved, benefits and services may be applied for.
Note: Under The American Rescue Plan Act of 2021, the federal government paid COBRA premiums for covered persons and their qualified relatives (spouses and dependents). To qualify for benefits, applicants must have lost employment (due to COVID) from April 1 through September 30. Stimulus payments of $1,400 were provided, along with increasing child tax credits, and extending unemployment compensation. The stimulus is available to single persons with adjusted gross incomes of $75,000 and less, and married couples with adjusted gross income of $150,000 or less.
Which “Qualifying Events” Lead To COBRA Continuation Coverage?
A qualifying event is a situation that forces you to lose qualified group medical coverage. The type of event helps determine the beneficiaries of benefits and the duration of their coverage. Several of the most common events include:
Death of the employee resulting in a spouse or dependents becoming eligible for coverage.
Termination of the worker’s employment with no chance of immediate rehire. Gross misconduct must not have been the reason.
If the primary employee divorces, the spouse and children become eligible if they are losing coverage.
Reduction in employment hours. This reduction must be semi-permanent or permanent, and not temporary.
If the primary employee becomes eligible for Medicare, and qualified coverage is lost, the spouse and children are eligible for continuation coverage.
NOTE: “Qualified Beneficiaries” can also obtain coverage. Typically, on the day before the loss of coverage, these designated persons were an employee, the employee’s wife or husband, or a dependent child, that does not necessarily have to reside in the household. However, any child that was adopted or born during the continuation period qualifies for the conversion option. Agents, directors, and independent contractors who are part of a group plan may also be considered qualified beneficiaries. For public sector group plans, elected officials and political appointees may also qualify.
Losing a “dependent child” status is considered a qualifying event if coverage is lost. Marketplace plans are offered until the dependent reaches age 26. At that time, many options become available, including “catastrophic” contracts. However, these plans are not eligible for federal subsidies. All other tiers are eligible.
The following situations DO NOT result in a qualifying event:
Employee was not receiving benefits at the time of termination.
Employee was terminated because of “gross misconduct.”
Note: A second qualifying event (additional 18 months) can be granted after the initial 18-months of continuation coverage. Several examples include loss of dependent child status, death of covered worker, legal separation or divorce of employee and spouse, or covered employee becoming Medicare-eligible.
An employer also must notify the plan regarding the following qualifying events: bankruptcy of the employer, Medicare eligibility for employee, death of the employee, or reduction in work hours of employee or termination. The employee must notify the plan when a divorce, legal separation, or child’s loss of dependency status occurs.
How Do You Know If You Are Eligible For Coverage?
An SPD (Summary Plan Description) illustrates your benefits, rights, and other pertinent information regarding your healthcare conversion options. Generally, within three months of your first day of coverage at your place of work, this packet is sent to you. Once received, you should always keep the information at home with other employer-related paperwork.
Once you no longer work for your employer, written notice will be provided, notifying you of specific dates, details, and deadlines. This notification must arrive within 30 days and you are provided 60 days (or more) to make a selection and enroll in an available plan. Providing notice of a qualifying event is generally the responsibility of the employer.
If there are significant changes to the plan, you are provided an SMM (Summary of Material Modifications) within 210 days following the end of that plan year. If there are benefit reductions, only 60 days is allowed from when the reductions became effective. You are always provided a copy of plan benefits or changes within 30 days of request.
However, once an employee is terminated, contacting the HR or employee-benefits department is highly recommended. If a financial institution (insurance company, for example) administers benefits, contacting the insurer directly may provide more time to review options. Decisions for dependent children can be made by either eligible parent. A child that has not reached age 18 can be represented by a parent or legal guardian.
NOTE: A “general notice” must also be sent to each employee and spouse. A description of rights is included along with other information. However, it can also be sent along with the SPD, and the requirement will have been satisfied. Multi-employer plans are allotted specific rules regarding notices. Qualifying event time limit notices and determining eligibility for qualifying events may differ from single employer plans. However, the SPD must specify specific differences.
An election notice of rights typically contains the following information:
Beginning date of coverage
Current monthly premium
Payment due dates
Election deadline date
Address where to send payments
Retroactive coverage premium (if applicable)
Written explanation and description of procedures
Reasons for early termination
Maximum period of continuation benefits
Which Benefits Will Be Included?
Your converted coverage must identically match the benefits you were receiving while an employee of the company, or the plan benefits that are being offered to current employees. Thus, if your major medical deductible was only $500 or $1,000, and there were no copays on primary-care physician (pcp) and specialist office visits, these benefits must be carried over. Maximum out-of-pocket expense limits (MOOP) will also not change. Generally, the maximum MOOP is $9,100.
Life insurance and disability benefits are not included since they are not considered medical care. Plans that offer coverage for only life insurance and/or disability benefits are not covered by COBRA. Long-term care, auto, home, and critical illness plans are also not included. These types of plans may be privately purchased without Open enrollment deadlines. Life insurance policies should be purchased from different carriers that provide your property and casualty coverage.
Doctors, specialists, medical facilities, and hospitals that were previously “in-network” should continue without interruption. However, each year, the provider network adds and subtracts participants, so an updated directory should be requested annually. Also, if any adjustments or changes are made to the master policy while you are receiving continuation benefits, those same changes would also apply to yourself. Children born or adopted during the continuation period will also be able to be added to the policy without any medical underwriting. They may also enroll in separate policies (non-COBRA).
Newborns’ And Mothers’ Health Protection Act (NMHPA)
The “Newborns’ Act” was passed in 1996, and provides assistance regarding the duration of a hospital visit following a birth of a child. Employer-sponsored policies must provide at least 48 hours of coverage following a standard vaginal delivery. If the delivery is a cesarean section, the minimum coverage must extend to 96 hours. However, with the mother’s permission, and physician approval, a quicker release is allowed. The mandatory hours begin at the time the baby is delivered.
This law applies to private individual and family policies and group medical plans offered by an employer. Group coverage can be self-funded or contracts issued by the carrier. The Department of Labor regulates private group health plans. CMS regulates local and state plans. The State DOI also regulates specific plans. Self-funded private group plans NMHPA standards apply.
Generally, PPO, HMO, and EPO plans provided by insurers are covered under this legislation. Maternity benefits are considered “essential,” and are included on all qualified private and Group policies. Group plans may be issued directly through the carrier or privately funded. It is also possible that a local state law will supersede the federal legislation. Provider networks may also require advanced notification that specific facilities will be utilized.
The Act did not apply to previously-available state high-risk pools. These pools were eliminated when the ACA Legislation was passed. Benefits covered by the NMHPA apply to the mother, and not the child, regardless if the child is receiving benefits under a different policy. Newborns can be added to a policy during the enrollment process.
Can COBRA Coverage Be Taken Away?
You can lose benefits if certain situations occur. For example, if you don’t pay a current premium within the billing and grace period, the policy will terminate. Although you can request coverage to be reinstated, it is not an obligation of the carrier or your prior employer to comply with the request. The Employee Benefits Security Administration can provide assistance if your coverage was wrongfully terminated.
Also, if your prior place of work no longer offers group healthcare benefits to employees, once again, you may be without coverage. Eligibility for Medicare, or if you obtain other employer-sponsored coverage, will discontinue your existing benefits. Of course, any termination must be provided in writing in a timely manner. You may also choose to apply for a non-compliant ACA medical plan, although coverage may be limited, and pre-existing conditions may not be covered.
Fairly popular health insurance alternatives also include Christian medical coverage, which in selected situations, can provide fairly low-cost options. However, specific guidelines and requirements must be met, and enrollment is not guaranteed. Payment of claims is also not guaranteed, so consumers should cautious when purchasing these types of policies.
Can Benefits Ever Be Extended?
Assuming you are currently covered for the standard 18 months of benefits, there are two scenarios that may allow you to continue beyond the normal expiration date.
Becoming Disabled – If just one person among all persons receiving benefits becomes disabled, than all qualified beneficiaries receive an additional 11 months of coverage. Thus, 29 total months of COBRA benefits would be afforded. However, the cost of coverage can rise by up to 150% during the 11-month period. The disability must be approved by the Social Security Administration, and occur during the first two months of coverage, and continue for the entire initial 18-month period.
Once no longer disabled, the 11-month continuation expires. When the SSA determines the disability no longer exists, often, the plan administrator should be notified. The rules regarding disability should be clearly stated in the plan SPD.
Additional Qualifying Event – Examples include employee becoming Medicare-eligible, death of primary employee, legal separation or divorce, and loss of a dependent child. The SPD will contain specific information regarding how to notify the plan administrator details of the event. 60 days is typically the time-period provided to file the claim. NOTE: 36 months (instead of 18) of continuation coverage is offered if the employee enrolls in Medicare, legal separation or divorce, death, or loss of the dependent child status.
What Is HCTC?
HCTC is a “Health Coverage Tax Credit” that can assist with paying monthly premiums. However, several conditions must be met to qualify for the rate reduction. Several obscure situations include being impacted from global trade, or if the Pension Benefit Guaranty Corporation is paying you a pension. If you are fortunate enough to qualify for HCTC assistance, about 3/4 of your premium will be paid by the program. Marketplace plans are not considered to be qualified coverage.
Individuals are eligible for benefits because of a qualifying job loss. Also, persons between the ages of 55-64 who have defined-benefit pension plans that were taken over by the PBGC. Other eligible persons include trade adjustment assistant recipients, family member of RTAA, TAA, or ATAA recipient, or a Pension Benefit Guaranty Corporation payee. If claimed as a dependent on another person’s tax return, eligibility is lost. Persons eligible for Medicaid, Medicare, TRICARE, or CHIP are also not eligible.
When your tax return is filed, a credit is requested for the reimbursable amount you paid. However, full advancement of monthly payments has been granted. Important Note: Beginning four years ago, you were no longer allowed to use Marketplace plans for the credit. Also, this credit expires in 2020, unless renewed. However, the IRS determined that all plans that qualified for the HCTC through 2013, will continue to earn the credit.
Qualified applicants can file IRS Form 8885 (Health Coverage Tax Credit) when your federal form is completed. Special instructions are provided, although some documentation may be needed. You will also need to verify that your premium has been paid and that the coverage was “qualified.”
Applicants are not eligible for the HCTC if they are claimed as a dependent on a different person’s federal income tax return. Household members that have enrolled in a state or federal Marketplace plan are also not eligible. Enrollment in the following programs also will not qualify for the credit: CHIP, Medicare, Medicaid, TRICARE, or Federal Employees Health Benefits Program.
Family And Medical Leave Act (FMLA)
Under the FMLA, an employer must continue benefits for workers that take an approved leave of absence, and the coverage must be identical to benefits that would have been provided if the employee was still actively working. However, these benefits are not considered to be COBRA continuation coverage, and a leave of absence is not a “qualifying event.” However, if the worker makes the decision not to return to work (permanently), a COBRA eligibility event would occur. The employee, of course, would be required to notify their employer that they would not be returning.
Eligible employees must work for a “covered employer,” and been employed there for a minimum of 12 months. 1,250 of work hours are required within the last 12 months prior to the leave. The location of work must have at least 50 employees within 75 miles.
Eligible workers are entitled to 12 weeks of leave over a 12-month period. Valid reasons include:
Serious medical condition resulting in the employee unable to perform their normal job duties.
Care for a newborn within one year of birth or birth of a child.
Care for worker’s spouse, child, or parent with a serious health condition.
An adopted child or child placed into foster care during first 12 months.
When worker’s parent, child, or spouse is military active duty is urgently needed for duty.