What you need to know about COBRA

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act.

Under this act, employees are allowed to pay a premium in order to remain on the group health insurance they obtained through their own employment or the employment of a family member.

Qualifying events

Some of the events that qualify you for coverage under COBRA are as follows:

• Employment is terminated
• Falling under the hours-per-week-worked threshold for employer coverage
• The insured employee dies, leaving dependents without coverage
• The insured employee legally separates from or divorces their spouse, who still needs coverage

How long can you remain on COBRA?

In the majority of cases, the maximum amount of time you can remain on COBRA is 18 months. You are allowed to cease coverage through COBRA at any time.

The Affordable Care Act and COBRA

One of the reasons COBRA was so important in the past is that it allowed those with pre-existing conditions to obtain coverage when private insurance might deny them. After the ACA was passed, insurance providers were no longer allowed to deny coverage to those with pre-existing conditions.

As long as the ACA is in place, COBRA is an option rather than a necessity. You may need COBRA if you are unable to find a comparable private policy or if you will be eligible for another work policy or Medicare before your COBRA period comes to an end.

How much does COBRA cost?

COBRA can be expensive, as it requires you to pay the full cost of your group health coverage — both the employer and the employee share — plus as much as 2 percent more to cover administrative costs. In some cases, you can drop vision and dental coverage to reduce costs.

If you are trying to determine what is best for you, speak with an experienced insurance broker that can compare COBRA to multiple private plans, allowing you to make an informed decision.