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Cobra Insurance

What is COBRA

COBRA stands for Consolidated Omnibus Budget Reconciliation Act which was passed by the Congress in July, 1986 by amending the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act, in order to ensure that there is continuation of group health coverage that otherwise comes to an end.

Who are eligible for COBRA

Normally three groups of people, referred to as beneficiaries, are eligible for COBRA i.e. employees or former employees (retirees) in private businesses; their spouses; and their dependent children. One has to continue with COBRA for the whole time. Apart from that, an individuals spouse or any of his/her children might get enrolled in COBRA. In the event of forgoing COBRA, any one of his/her qualified family member might choose to continue with their health cobra insurance benefits under his/her erstwhile employers plan. Employees serving in state and local governments as also workers classified as independent contractors are also eligible for COBRA. But there are certain exemptions to the applicability of COBRA in the District of Columbia, federal employees, some of the organizations linked with the church and also in case of companies where there are less than 20 people. The IRS rules indicate that employers should count part-time workers into their employee fold in order to find out if they can claim exemption. In order to be eligible under COBRA, one must be covered under an employer health plan. If ones employer has more than 20 workers in his payroll and does not offer health coverage, or offers coverage just to some of the groups of employees and excludes someone, he would not be eligible for COBRA even if one of the qualifying events happen and his/her spouse or children will not be eligible either. COBRA coverage of an individual comes to an end when an individual :

(i) attains the final day of the maximum coverage (ii) irregularity in paying premiums happen (iii) employers stop any group health plan (iv) the employer shuts down his business (v) one gets coverage through another employer group health plan which does not have any exclusion or limitation as regards pre-existing conditions.

How does it work:

The law grants some degree of portability on individuals having health cobra insurance provided by their employers. Under the provisions of this law, employers who give a group health insurance plan must offer employees who would lose coverage due to loss of jobs or a reduction in the working hours the choice to continue with their health insurance coverage for up to eighteen months. COBRA permits up to thirty-six months of coverage in case of spouses and dependent children whose coverage ends due to the death, divorce of an employee or due to becoming eligible for Medicare, and in case of children, it also allows for thirty-six months of coverage who might otherwise lose coverage due to their old age in order to maintain their eligibility as dependents. These alterations in situations such as job change, divorce, etc which would outcome in a loss of health are known as qualifying events.

The period of coverage terminates in case the period of eligibility ends, when an individual ceases to pay the needed premiums, or in case the individual becomes entitled for group health insurance from

another source, like from a different employer which does not exclude preexisting conditions. Besides, people becoming eligible for availing Medicare becomes disqualified for COBRA, even though their dependents are able to maintain their coverage. Under COBRA, it is the responsibility of employers to notify their covered employees, spouses, and dependents when they become eligible for continuance of their coverage. The coverage under cobra insurance in case of beneficiaries should also be identical to that provided to similarly placed active employees and their dependents. However the only exception remains that employers might ask for payment from COBRA beneficiaries upto 102 percent of the average employer cost of providing health insurance under its group plan instead of the rate which is nominally charged to active employees that is highly subsidized. It is seen that the average premium under COBRA comes to about $400 per month.

Benefits of COBRA:

People who do not posses alternative sources of health insurance coverage that are feasible, the acceptance rate of coverage under COBRA is roughly around 65 percent. Therefore, COBRA is an important source of health insurance coverage targeted at the particular segment of population which is unable to get a health insurance provided by the employer. Research shows that availability of continuation coverage has raised the probability of insurance coverage in case of people who are scheduled to retire early and those whose age range between fifty-five to sixty four, by at least 6 percent. Apart from the positive impact on insurance coverage, COBRA has put considerable favourable effects on the individual labor force behavior. In case of the most of the full-time workers, employment and health insurance are both sides of the same coin. Any change in employment, shifting between jobs, becoming self-employed, attaining the age of retirement, or lay offs will entail surrendering the health insurance provided by ones current employer. Besides, there is a difference among various insurance plans. Some possesses higher deductible compared to others, while some need copayments, some give the insured persons more choice in selecting physicians, while some of them remove pre-existing conditions, some offer more services compared to others. The variation in characteristics of the plan along with the considerable divergence in the needs of the individual mean that some people will accord a higher value on maintaining their current employer-provided health insurance compared to others. Nevertheless cobra insurance permits individuals to maintain their health insurance which they get from their current employer in case their current employment situation undergoes a change.

Medical benefits available under the plan

The various medical benefits available under the terms of the plan to the COBRA beneficiaries include: (i) Inpatient and outpatient hospital care (ii) Physician care (iii) Other major medical benefits inclusive of surgery (iv) Prescription drugs (v) Other medical benefits like dental and vision care.

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