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• How can COBRA help maintain the financial security that insurance brings, and the continuation of coverage I need to lower my risk from unforseen medical conditions 

 
COBRA is the name for the Federal regulations that address an employee’s ability to retain group health coverage if it is lost due to termination, disability, death of the covered employee or other qualifying event.

COBRA regulations apply to businesses with 20 or more employees that offer group health insurance. It does not matter if the employer pays for the premium, in part or in whole, for its employees, only that the coverage is offered. For the purposes of COBRA, group medical coverage is interpreted loosely and includes everything from Preferred Provider policies, HMO coverage, self-funded plans, to any variation of an employer/employee arrangement for medical care. Several states have additional regulations requiring businesses employing fewer than 20 people to comply with COBRA law. Determination of eligibility depends on the event that caused the loss of benefits.

Eligibility and Qualifying Events

Several situations fall into the category of a qualifying event and they can vary for workers and their qualified dependents. For employees, the most common event is unemployment. Coverage is available to former employees who were terminated for anything other than gross misconduct, were laid-off due to a reduction in force, had their hours cut below the required number to receive health care benefits, or voluntarily left their position.

Dependents that lose coverage due to a covered employee’s qualifying event are also eligible for continuity coverage. Spouses become eligible due to divorce, legal separation, death of the employee, or the covered employee becoming eligible for Medicare. A beneficiary’s children also become eligible for COBRA coverage if they lose their status as a dependent.

Coverage and Premiums

COBRA regulations stipulate that a qualified beneficiary must receive benefits identical to those offered to current employees. Insurance providers may not reduce coverage or modify benefits to those receiving continuity coverage unless the changes affect all those covered under the policy. Children born or adopted during the coverage period are automatically enrolled in the plan. Payment of the plan premiums are normally the responsibility of the beneficiary and can be prohibitively expensive. Although rare, some employers include payment of COBRA premiums, all or in part, as part of its benefits package.

Premiums for continuation coverage are equal to the cost of the group insurance plus up to an additional 2% to cover administrative costs. The first payment is due no later than 45 days after acceptance of COBRA coverage with subsequent payments due according to the schedule established by the medical plan and usually include a 30-day grace period. Coverage may be discontinued due to non-payment of the premiums.

In February 2009, the United States Congress enacted a subsidy for a 65% reduction in COBRA premiums. The subsidy is available for up to nine months for workers that involuntary become unemployed between September 1, 2008 and December 31, 2009. If a beneficiary is qualified for the subsidy, they will be billed at the reduced rate and their former employer will be given a tax credit for the remaining premium cost. The subsidy is subject to limitations and eligibility requirements separate from those of COBRA. The U.S. Department of Labor has posted an FAQ on its website detailing continuation coverage and the reduced premium requirements.

Length of Coverage

Generally, beneficiaries are entitled to a maximum of 18 months of COBRA insurance. Under certain circumstances such as a second qualifying event during the original coverage period, benefits can be extended up to a total of 36 months. If other group insurance becomes available through a new employer that does not impose pre-existing conditions limitations or the beneficiary becomes qualified for Medicare, continuation coverage is no longer available. Additionally, if the former employer discontinues group medical coverage or goes out of business, COBRA benefits will no longer be offered. Term limits may differ for beneficiaries who the Social Security Administration recognizes as disabled and who meet additional criteria.

Notification of Rights and Responsibilities

Employers and plan administrators are required to provide all qualified beneficiaries of continuation coverage with a COBRA General Notice detailing their rights and the plan provisions within 90 days of eligibility. At the time of a qualifying event other than divorce, legal separation, or change in dependent status, the employer must notify the insurance provider of the event. The employee is responsible for notification of the other qualifying events.

George L. Fox, LUTCF, serves as Vice President of Planning Financial Futures, Inc. He is a lifetime resident of Long Island and lives in Huntington with his wife, Vicki, and their three children. George is a graduate of the State University of New York, NYIT and the College for Financial Planning.

Source: http://www.cobrahelpcenter.com

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