September 18, 2009
If you have recently lost health insurance coverage through your employer from voluntarily or invulnerably termination of employment (excluding reasons of gross misconduct), you and your dependents may be eligible to continue your coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act). Understanding the basics of how COBRA works and what your options are, can help you make better choices with less stress.
Contrary to popular belief, COBRA is not a separate insurance company or policy provided by the government. It is a ruling by our government allowing you or your dependents to purchase the same health insurance policy you have been receiving back from your company.
If your employer has more than 20 full-time employees, they are required to notify you and your dependents within 14 days from the date of your termination of your rights under COBRA.
You then have 60 days to notify your employer if you wish to continue your coverage. After you notify your employer, you then have another 45 day grace period to pay your premiums.
Many people make the mistake of either signing up right away out of fear of not having insurance or looking at the cost and immediately waiving coverage. The cost can be intimidating, as the rates are expensive, up to 102% of the actual cost that the employer paid for your coverage.
Before you make any hasty decisions, take into consideration the following two questions. Do you think you will be covered under another policy within 60 days? Or, are you or a covered dependent currently being treated for a medical condition?
If you think you will have coverage within 60 days, save yourself some money and do not immediately sign up for COBRA. However, do not waive your option. Remember you have 60 days to decide; you do not have to decide immediately. If during this time, all you have is a forty dollar claim, the forty dollars may be a whole lot cheaper than the price of the full premium. During these 60 days, if you were hospitalized for major surgery, you would still be able to immediately elect back your coverage to the day you lost it. If you were too hasty and waived your option, you might still be able revoke your waiver, but your insurance might only be reinstated from the date you revoked it, and not to the date you lost coverage. You have nothing to lose by waiting the 60 days to decide.
If you are unsure if you will have coverage in 60 days, yet you have no ongoing medical or pre-existing conditions, you can still hold out on electing COBRA, in the chance that a new policy soon becomes available. (There are many individual policies on the market that may prove to be a more affordable alternative if you are in good health). If after 60 days you still have not found coverage, go ahead and elect COBRA, keeping in mind that you have yet another 45 day grace period to pay your premiums. If you become covered under another plan within the next 45 days, just notify the COBRA administrator that you have found other coverage, and cancel your election. You will have saved yourself a ton of money. If a medical emergency comes up in that 45 day grace period, just pay your premium in full, and you coverage will be reinstated to the date that you lost it.
Additionally, if you or a covered dependent are currently being treated for a medical condition, you might be subject to a pre-existing condition clause under a new policy. However, under the HIPAA (Health Insurance Portability and Accountability Act), if you do not have a lapse in coverage for more than 63 days and your new plan covers your condition, the new policy will have to give you credit for each month you were previously covered under your old policy towards their exclusion period. This could reduce or eliminate the exclusion period entirely.
For example, say you are diabetic and have been covered under your previous policy for 12 months. You terminate your employment and decide not to immediately elect COBRA. You then become eligible to participate in a new plan that covers diabetes; however the new plan has a pre-existing condition clause that states that you must wait 12 months before you can make a claim for this condition. All you have to do is present the new plan administrator with the HIPAA certificate, which you will have received from your former employer showing that you have been covered for this condition for 12 months. If you have not had a break in coverage of more than 63 days, the new insurance company will have to waive the entire 12 month pre-existing period and your claims for this condition will be covered.
If only one member of your family has a medical condition and you must opt for COBRA for that member, keep in mind that you do not have to elect COBRA for the entire family. Sometimes it is cheaper to elect COBRA for one member and find an individual policy for the remaining members.
Being without employment or starting a new job is a stressful period. Understanding your options can help take the load off.
For more information on COBRA and HIPAA, check out the U.S. Department of Labor's web site at http://www.dol.gov/dol/topic/health-plans/index.htm.
Deborah Abdulla came from a career as a Human Resources Manager of a busy oil and gas corporation in Houston, Texas. With a deep understanding of the daily stresses of her employees, she started her own business called Indigo-Daisy-Shack which offers subtle ways to calm, relax and de-stress. You can see her web site at http://www.indigo-daisy-shack.com