What Are COBRA Benefits?

The well-known nickname of the Consolidated Omnibus Budget Reconciliation Act, COBRA is a federal law that allows employees and their immediate family members (dependents) to temporarily continue their work-provided health insurance coverage.

Therefore, if you are facing a job loss, death of a spouse, or divorce, all of which may change your eligibility for health insurance coverage, you should find out if you are eligible for COBRA benefits.

Who Is Eligible for COBRA Benefits?

COBRA generally applies only to state and local government employees and employees of private businesses that employed 20 or more part-time or full-time people during the prior year. That employer must also provide a group health insurance plan to employees. 

Additionally, COBRA benefits are available only to certain people, or “qualified beneficiaries,” a category that includes an employee, the employee’s spouse, and the employee’s dependent child(ren).

Under some circumstances, COBRA benefits may also be available to retired employees, along with their spouses and dependent child(ren), as well as independent contractors who participate in a group health insurance plan.

The most important thing, though, is that in order to fall within any category of qualified beneficiary, you must be a participant in the employer’s group health insurance plan. That means if you didn’t have work-provided health insurance while you worked there, you will not be eligible after you leave.

Eligibility for Beneficiaries

It is important to know that COBRA benefits are available to qualified beneficiaries of covered employers only in very specific circumstances, which are called “qualifying events.” The type of qualifying event determines which people are qualifying beneficiaries, how long people have to enroll in COBRA benefits, and how long COBRA benefits are available to them.

For instance, for employees, qualifying events include lay-offs or termination, except in cases of gross misconduct, or a reduction in an employee’s hours. For employees’ spouses and dependent children, qualifying events are the same as for employees, but also include an employee becoming eligible for Medicare benefits, divorce or legal separation, or death of the employee.

How Do the Benefits Work?

COBRA benefits can last anywhere from 18 to 36 months, depending on what type of qualified beneficiary you are, and what type of qualifying event has occurred.

For instance, in the case of a job loss, COBRA benefits typically are limited to 18 months. In the case of an employee’s spouse who has lost coverage due to a divorce, however, COBRA benefits can extend up to 36 months.

If you are eligible for COBRA benefits, you should know that you will be responsible for paying up to 102% of the entire premium of the health insurance plan coverage, which normally will be much more expensive than what your employer deducted from your paychecks.

If you find COBRA coverage to be too expensive, you may be able to purchase health insurance through your state’s exchange instead.

For more detailed information about COBRA and eligibility for benefits under COBRA, you can contact the U.S. Department of Labor by visiting their website.