Understanding Health Insurance and COBRA Provisions

Most Americans rely on their employers to provide health insurance coverage these days. But during this difficult economy, many people have discovered that their health insurance coverage can end with a job is lost or they no longer qualify for benefits. Purchasing an individual health insurance plan can be very expensive – and when you’re without a job, that’s just another expense that you can’t afford.

In 1986 the government enacted the Consolidated Omnibus Budget Reconciliation Act, most often referred to simply as “COBRA,” and for many Americans it has proven to be a real lifesaver in the years since. This law protects employees and their dependents in the event of job loss or divorce. COBRA gives you the ability to continue your health insurance coverage when you might otherwise have lost it. While larger employers only are required to comply with COBRA laws, many states have adopted similar protections for employees of smaller groups.

If you’ve lost your job, or if your hours have been reduced, you may qualify for COBRA health insurance continuation. And in the event of divorce, death, and other specified circumstances, your dependents may also be eligible to continue their health insurance coverage as well.

The coverage periods don’t go on indefinitely, however. Most extensions last for 18 months, while under certain circumstances, such as divorce or disability, the coverage may be continued for 36 months.

If your company has gone out of business, you may not have any option for continuing your health insurance through the former employer’s group plan. One exception is unions, where a collective bargaining agreement may require the coverage to be continued.

Whatever the circumstances, you will have to pay the entire health insurance premium yourself if you wish to continue your coverage under COBRA. It will be more than you paid as an employee, but it’s most certainly going to be less than you’d pay for an individual policy. And you won’t have to go through a lengthy application or underwriting process. Your coverage will be exactly the same as when you were part of the group plan.

As part of The American Recovery and Reinvestment Act of 2009, individuals who lost their jobs between September 1, 2008 and January 1, 2010 will only be required to pay 35% of the COBRA coverage premiums for up to nine months. The other 65% of the COBRA premiums are subsidized, but may need to be repaid for some individuals.

The Health Insurance Portability and Accountability Act of 1996 expanded COBRA

HIPAA, enacted in 1996, took certain COBRA rights a step further, and created other healthcare rights for individuals. The main aspects of HIPPA include:

• Giving employees the ability to move from one employer to another with the assurance that if they were covered on the old employer’s plan, they would automatically be accepted on the new employer’s plan
• Eliminated the chance that any small employer (with 2 – 50 employees) might be rejected for coverage by requiring that insurance companies serving the small group market accept any employer that applied for coverage
• Made health insurance premiums more tax deductible for self-employed individuals
• Established a minimum length of stay for mothers and newborn children (48 hours for normal birth, 96 hours for cesarean section)

Clearly, when it comes to health insurance, an educated policy holder is their own best advocate. But thanks to the government, many improvements and safeguards have been created to ensure this important coverage is there when you need it most.

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