Why COBRA Health Insurance Benefits Aren"t Offered by all Employers
In response to issues that workers were facing when they lost their jobs €" as well as their employer sponsored health insurance benefits €" the United States Congress passed the Consolidated Omnibus Reconciliation Act, or COBRA, in 1986.
Essentially, this Act stated that certain employers are required to extend the health insurance benefits that are offered to their employees to those workers who have either had a drastic reduction in their working hours or who have terminated employment altogether.
The legislation was passed in large part to ensure that individuals €" as well as their covered dependents €" would not face a gap in health insurance coverage while searching for a new plan.
There are, however, some stipulations to COBRA in terms of which employees are eligible, which employers must offer COBRA, and how and how much premiums are paid. It is important to understand these criteria as they could essentially affect whether or not an individual is even eligible for a continuation of health insurance benefits through COBRA.
What Types of Employers Are Required to Offer COBRA?
According to the U.S. Congress, there are certain employers that are required to offer COBRA benefits to their affected employees and / or these individuals' covered dependents. These employers include:
There are some exceptions to those companies that must offer COBRA to their employees. These include:
Who is Eligible for Continuation of Benefits Through COBRA?
Those who are eligible for COBRA, provided that their employer is required to offer it, include employees who are currently enrolled in the employer sponsored group plan. In addition, qualifying beneficiaries may also be eligible to participate.
A qualifying beneficiary is considered an individual who is also covered under the plan immediately prior to the employee's change in employment status. Typically, qualifying beneficiaries are the spouse and / or dependent children of the employee.
How Long Do Benefits Last?
It is important to note that even if an individual opts for continuation of health insurance benefits through COBRA, the coverage will be considered temporary and the individual will still need to seek health insurance when the COBRA benefits cease.
In most cases, COBRA coverage will last for up to 18 months for an employee as well as their spouse or dependents that are also covered under the plan. Benefits, however, may be extended under the following circumstances:
How Much Does Coverage Cost?
In addition to the limited duration of benefits offered via COBRA, one of the biggest drawbacks to its coverage may be the cost. Typically, in most group health insurance situations, the employer picks up some or all of the premium cost.
However, once an employee opts for COBRA, that individual €" as well as any qualifying covered dependents €" will then be responsible for 100 percent of the premium cost. In addition, there can be a 2 percent fee that is added to the price of the COBRA premium. This amount goes towards paying the cost of the additional administrative work that is required for keeping the employee and / or their dependents in the plan.
What Other Options Are Available?
Although there are many advantages to continuing health insurance benefits through COBRA, there are also several drawbacks that could make the plan cost prohibitive or ineffective for a particular employee and their covered dependents.
In these cases, there are other options that may be considered by these individuals. One such choice may be a temporary or short-term health insurance policy. These plans can offer comprehensive health insurance benefits €" oftentimes with a total coverage in excess of $1 million.
It is likely that, depending upon the benefits and the deductibles that are chosen, the cost of a temporary health insurance plan could be less than the premium for a comparable amount of coverage under COBRA.
Temporary health insurance coverage can be a great option for those who will likely be covered again in the near future either by a longer-term policy or by the benefits that are offered through a new employer.
Another possible option in lieu of COBRA is a stand-alone or regular health insurance policy. With these plans, insured individuals may pick and choose the benefits that will be most needed. This is likely to keep the cost of the premium down.
Prior to moving forward with any health insurance related decision, it is a good idea to meet with a health insurance professional who can answer questions and concerns regarding which type of coverage will be best suited for the specific situation.
Essentially, this Act stated that certain employers are required to extend the health insurance benefits that are offered to their employees to those workers who have either had a drastic reduction in their working hours or who have terminated employment altogether.
The legislation was passed in large part to ensure that individuals €" as well as their covered dependents €" would not face a gap in health insurance coverage while searching for a new plan.
There are, however, some stipulations to COBRA in terms of which employees are eligible, which employers must offer COBRA, and how and how much premiums are paid. It is important to understand these criteria as they could essentially affect whether or not an individual is even eligible for a continuation of health insurance benefits through COBRA.
What Types of Employers Are Required to Offer COBRA?
According to the U.S. Congress, there are certain employers that are required to offer COBRA benefits to their affected employees and / or these individuals' covered dependents. These employers include:
- Typically, nearly any group health insurance plan that is maintained by an employer will be subject to COBRA requirements if the company has at least 20 full-time workers that were employed for at least 50 percent of the time in the previous year.
- Specific employers that are required to make COBRA available are those in the private sector as well as state and local government employers.
There are some exceptions to those companies that must offer COBRA to their employees. These include:
- The Federal Government. The group health insurance plan of the federal government is not required to offer COBRA to its employees. There is, however, a separate law known as the Federal Employees Health Benefits Amendments Act that states that the federal government must offer continuing health insurance coverage to its employees.
- Small Employer's Plans. Many small employers are totally exempt from COBRA. If an employer €" even if it maintains a group health insurance plan €" regularly possessed fewer than 20 employees on a typical business day during the previous calendar year, then the plan will not be required to offer COBRA to its workers.
- Church Related Plans. There are many churches and church related entities that are also exempt from offering COBRA to their employees.
Who is Eligible for Continuation of Benefits Through COBRA?
Those who are eligible for COBRA, provided that their employer is required to offer it, include employees who are currently enrolled in the employer sponsored group plan. In addition, qualifying beneficiaries may also be eligible to participate.
A qualifying beneficiary is considered an individual who is also covered under the plan immediately prior to the employee's change in employment status. Typically, qualifying beneficiaries are the spouse and / or dependent children of the employee.
How Long Do Benefits Last?
It is important to note that even if an individual opts for continuation of health insurance benefits through COBRA, the coverage will be considered temporary and the individual will still need to seek health insurance when the COBRA benefits cease.
In most cases, COBRA coverage will last for up to 18 months for an employee as well as their spouse or dependents that are also covered under the plan. Benefits, however, may be extended under the following circumstances:
- For spouses and / or dependents of the covered employee who are also included in the plan, benefits could be extended up to a total of 36 months if these individuals face a loss of coverage due to the employee's death, a legal separation or divorce from the employee, or various other €qualifying events.€
- For a covered employee who becomes disabled at any time throughout the first 60 days of coverage by COBRA, their benefits may be extended for up to a total of 29 months.
How Much Does Coverage Cost?
In addition to the limited duration of benefits offered via COBRA, one of the biggest drawbacks to its coverage may be the cost. Typically, in most group health insurance situations, the employer picks up some or all of the premium cost.
However, once an employee opts for COBRA, that individual €" as well as any qualifying covered dependents €" will then be responsible for 100 percent of the premium cost. In addition, there can be a 2 percent fee that is added to the price of the COBRA premium. This amount goes towards paying the cost of the additional administrative work that is required for keeping the employee and / or their dependents in the plan.
What Other Options Are Available?
Although there are many advantages to continuing health insurance benefits through COBRA, there are also several drawbacks that could make the plan cost prohibitive or ineffective for a particular employee and their covered dependents.
In these cases, there are other options that may be considered by these individuals. One such choice may be a temporary or short-term health insurance policy. These plans can offer comprehensive health insurance benefits €" oftentimes with a total coverage in excess of $1 million.
It is likely that, depending upon the benefits and the deductibles that are chosen, the cost of a temporary health insurance plan could be less than the premium for a comparable amount of coverage under COBRA.
Temporary health insurance coverage can be a great option for those who will likely be covered again in the near future either by a longer-term policy or by the benefits that are offered through a new employer.
Another possible option in lieu of COBRA is a stand-alone or regular health insurance policy. With these plans, insured individuals may pick and choose the benefits that will be most needed. This is likely to keep the cost of the premium down.
Prior to moving forward with any health insurance related decision, it is a good idea to meet with a health insurance professional who can answer questions and concerns regarding which type of coverage will be best suited for the specific situation.
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