If You Lose Employer-Sponsored Health Insurance, Consider COBRA and Other Options
The loss of a job often comes with the loss of employer-sponsored health insurance. It’s important to know your options and rights for maintaining coverage or getting alternative coverage, so that you and your family aren’t on the hook for steep medical bills or forgo necessary treatment. You will likely have several options, including COBRA.
COBRA: Continuation of Coverage through Your Group Health Plan
If you lose your employer-sponsored health insurance coverage, chances are you have a right to temporarily continue your group health coverage under a federal law known as COBRA. COBRA coverage applies to people whose employer has 20 or more employees and who lose job-based coverage because their job is terminated (for reasons other than gross misconduct) because their hours are reduced, or because of divorce or separation.
You Have a Legal Right to Elect COBRA Coverage
Group health plans must provide you notice of your right to continuation coverage when certain events that trigger the loss in coverage (known as “qualifying events”) occur. But how does the plan know whether you’ve lost your job, reduced your hours, or become entitled to Medicare? These are all qualifying events that your employer is obligated to notify the plan about within 30 days. On the other hand, if you lose job-based coverage because of divorce or if your child loses dependent status under the plan, you are responsible for notifying the plan of these events.
Once the plan receives notice of a qualifying event, it only has 14 days to provide you notice of your right to elect COBRA coverage. This notice must contain the information you need to decide whether you should elect continuation coverage, including what it will cost you. You are entitled to have 60 days to decide whether to elect coverage.
This strict timeline is aimed at ensuring smooth continued coverage, but as more big businesses outsource management of much of their benefits and insurance programs to third party administrators, required COBRA notices can slip through the cracks. If you don’t get your notice on time, or if it doesn’t contain the necessary information, you may have a legal claim. When one automated administrative error causes numerous people to miss out on their COBRA election notice, these claims may even be brought on a class-wide basis.
You May Have to Pay for COBRA Coverage
The good about COBRA is the quality of coverage must be identical to that provided to similarly situated employees; usually this means the same coverage you had before the qualifying event. But, the bad about COBRA is it can be expensive—more expensive than it was to have coverage as an employee. Employers can require those who elect COBRA coverage to pay the full cost plus a 2% administrative charge. Note the amount you have to pay cannot legally exceed 102 percent of the plan cost for similarly situated others who are covered under the plan.
Also note that you cannot be required to make any initial payment right away when you elect coverage; but you must make an initial premium payment within 45 days. If you don’t do so, you could lose all COBRA rights. Going forward, you must have the option to make monthly payments and you get a 30-day grace period for payment of any premiums.
COBRA Coverage Does Not Last Forever
COBRA coverage must extend from the date of the qualifying event for at least 18 or 36 months, depending on the type of qualifying event that triggered the COBRA rights. Generally, termination or reduction in hours has an 18-month maximum duration of COBRA coverage. Enrollment in Medicare, divorce or separation, death, and loss of “dependent child” status has a 36-month maximum duration period. Certain situations may enable you to get an extension on these timelines; we can help you understand if you may be eligible for such an extension.
When your COBRA continuation coverage period expires, you may have an opportunity to request special enrollment in a group health plan or Health Insurance Market Place plan (described in more detail below). However, if you terminate COBRA early, before the 18 or 36 month period expires, you generally have to wait to enroll in other coverage until the next open enrollment period.
Alternatives to COBRA
Given the expense of COBRA, it’s advisable to consider other coverage options you may have in the event you lose job-based health insurance. For example, if your spouse has a group health plan, you may be entitled to special enroll in that plan. Similarly, a dependent child may be able to special enroll in a different parent’s group health plan. To be entitled to this special enrollment, you generally must have had other coverage in place when you declined to enroll in the other spouse’s plan that you now seek coverage under.
Unlike COBRA, where you have a legal right to an election opportunity, you must request special enrollment in a spouse’s plan within 30 days from losing your job-based coverage. Another option you can consider is private health insurance options on the Health Insurance Marketplace. Loss of job-based coverage is a special enrollment event in the Marketplace. You can see what your premium, deductibles, and out-of-pocket costs will be before you make a decision to enroll. Being eligible for COBRA coverage does not impact your eligibility for Marketplace coverage or a tax credit.
Questions? Call Us.
Navigating what to do in the event you lose job-based health insurance can be stressful. If you have questions about COBRA or other coverage alternatives, or if you are concerned that you did not receive the COBRA rights you’re entitled to, feel free to contact the lawyers at Hawks Quindel for a free consultation.