COBRA is an acronym that stands for: Consolidated Omnibus Budget Reconciliation Act. Gee, that really clarifies thigs, does it not? What this is supposed to do and the conditions by which it attempts to do it can sometimes be just as ambiguous as the name itself. In short, the purpose of COBRA is to cover an employee during a change of employment. How nice of them to be there when otherwise we could suffer a lapse in health insurance coverage.
This factoid will attempt to clear up a few common misconceptions that they tend to lead you to believe in order to think that this is something that it is not. The most common disillusionment that I fell victim to was thinking that this is a government run program. We all know how concerned the American government is with making sure ALL Americans have access to health care and are plugged into some form of an affordable private health insurance plan, especially during election years. However, the COBRA plan is not administrated from Washington. The act just mandated it.
COBRA is in fact an act that in my opinion benefits insurance companies more than the insured. In order to qualify to continue your benefits under this law, you must meet certain conditions. The biggest string attached is that you have to pay the entire cost of the coverage i.e: what your employer shelled out for the health insurance premiums, including what portion may have been deducted from you pay. They argue that this group rate is normally less than what a person can get individual health coverage for, and normally this is true. See: Health insurance and self employment: Why so difficult?
Here is the rub: The law states that the coverage has to be exactly the same as what you had before the lapse in coverage beginning at the end of your employment. When I left my estimator and project manager job at a construction company that paid 100% of a top notch Blue Cross Blue Shield plan to build my first house and then go back into business for myself, the monthly cost of this plan was $1,200.00 per month…That was twelve years ago! I shopped around, and found a direct pay, individual plan with Blue Cross Blue Sheild, virtually the only game in town, that was less than $800.00. The co-pays and deductibles were higher, but still much better for our family’s situation. “Sign me up!” I said. They replied “Sorry, because you are eligible for COBRA, you do not qualify to enroll in a direct pay plan”
Hmmm. I hung up the phone. I swore, threw my note pad, and went on to pay over $12,000.00 in premiums, and thankfully, my healthy family used the coverage for nothing more than routine checkups, and a few sick visits to the pediatrician. Blue Cross Blue Shield made out great on that deal. The icing on the cake was this: When my lame accountant returned my taxes, four months late, it turned out that as a new business, my net income was low enough to have qualified for RIte Care, an excellent Rhode Island State program that does circles around COBRA when it comes to assuring that Rhode Islanders stay covered during lapses in employment, or when otherwise unable to participate in a group plan.
As part of the stimulus package, Washington has made some adjustments that help, See below:
The American Recovery and Reinvestment Act of 2009 (ARRA) provides a premium reduction to certain qualified individuals and expanded eligibility for COBRA.
Individuals who are eligible for COBRA coverage because of their own or a family member’s involuntary termination of employment that occurred from September 1, 2008 through December 31, 2009 and who elect COBRA may be eligible to pay a reduced premium amount that is only 35% of the premium costs for your COBRA coverage for up to 9 months.
Additionally, if you were offered Federal COBRA continuation coverage as a result of an involuntary termination of employment during that time period and you either declined to take COBRA coverage at that time, or you elected COBRA and later discontinued it, you may have another opportunity to elect COBRA coverage and pay a reduced premium.
If you have specific questions about your situation and how these new rules apply to you, you may wish to speak with one of their Benefits Advisors by calling 1.866.444.3272. You should also check the COBRA Premium Reduction FAQs.
