How do you qualify for COBRA continuation coverage?
You generally qualify for COBRA coverage if you were covered as an employee or dependent on an employer-sponsored policy, and your coverage is ending due to job loss, resignation, loss of hours, divorce, death of the employee, etc. But there are some circumstances where you won’t qualify for COBRA. For example, you’re not eligible for COBRA coverage if your company changes to a different health care plan and you want to continue under your existing plan, because you are instead eligible for coverage through the new plan. COBRA also does not have to be made available if you lose your job for gross misconduct.
How much does COBRA coverage cost?
COBRA enrollees are normally responsible for the full cost of premiums for their former employer’s plan, plus a 2% administrative fee. While you were employed, you paid only a portion of your coverage cost because your employer also paid a share. Paying the full price (plus a 2% fee) means your cost for COBRA coverage may be higher than you were expecting.
But the American Rescue Plan, enacted in March 2021 as part of the federal government’s COVID relief efforts, provides a 100% COBRA premium subsidy from April through September 2021. This subsidy is only available to people who involuntarily lost their jobs or experienced an involuntary reduction in their work hours that put them below the threshold for health benefits eligibility. The subsidy is available for current COBRA enrollees as well as those who enroll between April and September. And there’s also a one-time opportunity for people who initially rejected or terminated COBRA to re-enroll in it in order to receive the subsidy.
The law does not extend the duration of a person’s COBRA coverage, however — it still ends whenever it was initially scheduled to end, and the subsidy would end at that point too. The subsidy would also terminate early (ie, before September 30, 2021) if the person becomes eligible for Medicare or a new employer-sponsored health plan.
What does COBRA continuation insurance cover?
COBRA allows you to maintain coverage through the same plan you had while you were employed. Employer-sponsored coverage usually pays for costs such as hospitalizations, medical visits, prescription drugs, mental health care, rehabilitation services, and more. The American Rescue Plan’s COBRA provisions allow (but do not require) employers to let enrollees switch to a different plan that the employer offers and continue it with COBRA, instead of having the option to continue only the person’s current coverage via COBRA.
How does the Affordable Care Act impact the availability of COBRA coverage?
Before the bulk of the Affordable Care Act‘s (ACA) provisions took effect in 2014, COBRA was often the only realistic option for people with pre-existing conditions who were leaving their job and losing access to their employer-sponsored health insurance. Before 2014, coverage in the individual market was medically underwritten in most states, making it difficult or impossible for people with serious pre-existing conditions to obtain.
COBRA is still available — the ACA didn’t change anything about that — but individual market coverage is now guaranteed-issue for all applicants, regardless of their medical history. And losing access to an employer-sponsored plan is a qualifying event that triggers a special enrollment period in the individual market. So you can compare COBRA and individual market coverage to determine which one will be a better fit for your situation.