What Is COBRA?

• COBRA is short for Consolidated Omnibus Budget Reconciliation Act and was established in 1985. The purpose of this act is to ensure that group health coverage continues after someone becomes unemployed. However, COBRA is available only to people whose health insurance has been lost because of certain circumstances. In addition, health coverage through COBRA can be expensive because participants must cover the premiums entirely on their own.
  
  

Who Is Eligible?

• You may be eligible for COBRA if you have experienced certain qualifying events. The term "qualifying event" describes a situation that would cause a person to lose group health insurance and qualify for COBRA.
  
  

Qualifying Events

• If you are an employee, a qualifying event would include voluntary or involuntary termination of employment for reasons other than gross misconduct. A qualifying event also could be a drastic reduction in hours of employment, which may cause you to lose benefits. Basically, if you become unemployed or unable to receive benefits through your job, you may qualify for COBRA benefits.
  
  

Spouse or Dependent

• If you are a spouse of a person whose employment determined your health coverage, you also may qualify for COBRA. Qualifying events for spouses of covered employees are the same as those for the employee. This basically means that if someone loses a job for reasons other than gross misconduct, the spouse of the qualifying employee can receive COBRA benefits. Other qualifying events for covered spouses include divorce or death.
  
  Dependents share the same qualifying events as the covered employee. In addition, if you are a dependent child of a covered employee and you lose your dependent status, or the covered employee becomes entitled to Medicare, you also will qualify for COBRA.
  
  

Cost

• Although COBRA was meant to help those suffering from job loss to keep their benefits, COBRA is sometimes too expensive for unemployed people and their families to afford. According to a study by Families USA, the average out-of-pocket costs for a family is $1,000 per month under COBRA. As a result, only 25 percent of those who are eligible actually use COBRA.