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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
If you are laid off, healthcare coverage under the COBRA program is there for you. However, the costs are high and some do not qualify. So, let's examine COBRA. What Is COBRA and How Does It Work? By Britt Erica Tunick If you’ve ever been laid off, odds are good you have heard of COBRA. It’s healthcare coverage that enables you to maintain your healthcare for at least 18 months after leaving an employer, by assuming the costs your employer previously paid. COBRA was created to provide employees with peace of mind that they and their families will have continued healthcare coverage while looking for a new job. Unfortunately, COBRA wasn’t created to be kind to your wallet, making it a particularly unappealing choice at a time when watching every penny is more important than ever. The Consolidated Omnibus Budget Reconciliation Act of 1985 that Congress passed to ensure employees have access to continuing healthcare coverage after losing their jobs, allows employees to maintain the same healthcare coverage they had while employed. Under the law, any company in the private sector with more than 20 employees must provide COBRA coverage to any employee who is laid off, or whose hours are significantly decreased. Individuals who quit their jobs or who are fired for cause are not eligible for coverage. Additionally, health plans sponsored by the Federal Government, churches and a handful of other organizations are not subject to COBRA requirements. Though employees may be comforted knowing they can maintain their healthcare coverage if they are laid off, a major drawback of the coverage is its cost, since most employers significantly subsidize the costs of the insurance plans they provide to their employees. Purchasing COBRA coverage not only requires paying 100% of the premium for your health insurance, there is often an additional 2% in administrative fees translating to an average 77% cost increase for health insurance from the amount an employee will have paid for the same coverage while still employed. Beyond employees, COBRA was also set up to protect the family or an insured individual. As such, spouses and children who remain dependents are also eligible for COBRA and not only when an employee is laid off, but in cases where a spouse divorces from a covered employee, when a covered employee dies, or when a covered employee is suddenly eligible for Medicare. |
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