What Does a COBRA Policy Cover?

COBRA is an acronym with which Americans are becoming increasingly familiar. But what does a COBRA policy cover?

COBRA Policy Defined

According to the U.S. Department of Labor, the Consolidated Omnibus Budget Reconciliation Act became enacted in 1986, and “gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce and other life events.”

Otherwise Known As Continuation Coverage

Otherwise known as continuation coverage, the duration of your COBRA coverage will vary depending on how you became qualified for it. If you were fired or your hours were reduced, it will cover you for 18 months. Otherwise, you can enjoy these benefits for up to 36 months. They generally cover yourself, your spouse and a dependent child.

Paul M. Hamburger, a partner and head of benefits practice in Washington, DC-firm Proskauer Rose LLC and the author of Mandated Health Benefits – The COBRA Guide, says the most important things to understand with regards to COBRA are your employer’s size and the procedural aspects.

Who Qualifies For COBRA

Federal COBRA only applies to you if your company employs more than 20 people under the same group plan. If not, then you qualify for state COBRA. States like Louisiana (called Regulation 68), New York and California have all passed “mini-COBRA” state laws to cover people not eligible for federal COBRA coverage. Insurance companies run these state programs, according to Hamburger, and they cover you for 36 months, versus 18 months of coverage under the Federal plan (if you have lost your job or your hours were reduced).

The procedural process under COBRA is very much about timing. Even when you are in good graces at work, you are supposed to be given a general COBRA number (in case of spousal death or divorce). If you are fired or let go, the plan administrator has 44 days to inform you of your COBRA rights. Then you have another 60 days to elect coverage (or not).  If you pay your COBRA coverage bill within 45 days after that 60-day period, you will be eligible for coverage retroactively to the day your job ended.

COBRA Fills In the “Gaps”

“If you are having trouble finding a job, COBRA is a good way to fill in that gap,” Hamburger said. “But you want to make sure that COBRA is begin paid on time and in full.”

Many companies will hire independent COBRA administrators to oversee COBRA processing. Those people are not experts on COBRA however, Hamburger notes, so you should determine your best option for answers. Since COBRA is complex and time-sensitive, asking your questions over e-mail and having them answered in writing should give the process more clearly.

“Big problems arise in he said/she said scenarios,” Hamburger said. “Make them put it in writing and then follow those directions and if there is a dispute down the road, having everything in writing makes the whole case a lot easier to prove.”

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