If your employer has a health insurance plan and at least 20 employees, you're probably covered by COBRA, the Consolidated Omnibus Budget Reconciliation Act. Under COBRA, you usually can keep your health-care coverage after you leave your job, even if you were fired. However, you'll probably pay more than you did while you were still employed.
The Qualifying Event
COBRA kicks in after what federal law terms a qualifying event. If your boss fires you, you quit, or there's a mass layoff, you're eligible for COBRA. You also qualify if your hours are reduced so that you don't qualify for regular coverage. About the only thing that disqualifies you is if your employer fires you for gross misconduct. In that case, you're not covered by COBRA. You also must have been covered by the plan on the day before the qualifying event or COBRA doesn't apply.
Applying for COBRA
COBRA doesn't kick in automatically. If your boss fires you, she has to notify the insurer within 30 days. The insurer then contacts you, and you get at least 60 days to decide whether to enroll in COBRA. If you initially say no, you can change your mind if you do it before the 60 days are up. After that, you're stuck. Once you sign up, your benefits are identical to those available to employees still at the company.
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COBRA typically costs you more out of pocket than an employee's coverage, even though the benefits are the same. Your insurer has to charge you the same premium, though it can add a 2 percent administrative fee. However your former employer no longer is obligated to subsidize part of your premium, as it likely did before. Instead, the company can now require you to pay 100 percent of the cost of coverage. For most COBRA recipients, that translates into a substantial increase. Your co-pays and out-of-pocket costs are the same as for employees. If premiums or co-pays go up for employees, yours go up too.
You're free to drop COBRA after signing up if you find better coverage elsewhere. Otherwise, you can stay on COBRA for 18 months, though there are exceptions. For example, if you become eligible for Medicare during the 18 months, the insurer can terminate your COBRA coverage. If your former employer stops offering health coverage or goes out of business, you lose your coverage. If you or a family member becomes disabled during the COBRA period, you may be able to stay on COBRA an extra 11 months. However, your insurer can charge you an increased premium during that 11-month extension. In addition, COBRA may be extended up to 18 more months if a participant experiences another qualifying event. For example, a covered employee's spouse can apply for an extension in case of a divorce.
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