COBRA is an acronym which stands for a federal law enacted in 1985 entitled the Consolidated Omnibus Budget Reduction Act. The purpose of the law was to allow qualified employees to continue their group Health Care Coverage or Health Insurance plan, at their own expense, for a designated period of time as a means to ensure Continuity of Coverage and to help those with serious medical problems that may not otherwise be able to get other forms of coverage. The COBRA law requires the previous employee’s group health care coverage or health Insurance company to remove them from the employer’s plan and to offer the exact same coverage to the employee. However, the ex-employee will now pay the full load of the Health Care Plan Premium plus a small percentage increase (limited to 10%).

You may be eligible for a COBRA plan only, if you are currently or were recently (within 60 days of leaving the workplace) employed by a company that had more than 20 employees and offered group health insurance at the time of the qualifying event. Qualifying events are instances where group health care plans are terminated, qualifying individuals for COBRA plans. The qualifying events include:

• Termination of employment (death, retirement, dismissal, resignation)
• Reduction of working hours
• Divorce (spouse)
• Loss of ¨dependent¨ status (child)

If you are unsure about whether you will be eligible for continuing your health care coverage or health insurance plan under COBRA you should contact the Human Resources person at your company or a Licensed Certified Field Broker/Agent ( Click Here) who will be able to make sure you are fully informed of your options. The employee’s COBRA election must take place within 30 to 60 days from the last date of employment. All employees are supposed to be advised of their COBRA options and terms prior to leaving the company. Most COBRA coverage lasts for a period of 18 or 36 months. Once the COBRA coverage period ends the consumer must seek replacement coverage. However, in 2003 another federal law was passed called HIPAA (Health Insurance Portability and Accountability Act). Which entitles persons exhausting their full maximum term COBRA coverage Guaranteed Issue coverage (see HIPAA section below).

Should I take COBRA or get my own health care plan?

There is no straight forward or single answer to this question. Generally speaking, group employer plans are more expensive that a corresponding Individual/Family plan. The smaller the employer group the larger the difference in premium cost to the point where small groups (2-50 employees) often carries a 30-60% premium over an individual/family plan. The reason for this stems from the fact that group employer policies guarantee that any full time employee (and dependents) will be covered or insured under the plan regardless of medical condition. Obviously, there is an additional unknown risk that the health care coverage provider or insurance carrier is taking that is directly passed on to the employer with a small group plan. On the other hand, very large employers are often able to effectively negotiate better premium rates using their large number of employees as leverage. If you are covered under a small group plan you may be able to obtain a more affordable plan by seeking individual/family coverage.

A second thing to think about is related to your health and that of your family members. In most states, the Health Care Coverage Providers and insurance carriers are allowed to use the medical history information disclosed as part of the health application to determine the final premium and whether or not they want to offer coverage . This is referred to as Underwritten policies. Currently only a limited number of states require companies to offer plans on a guaranteed issue basis (see glossary definition for list of the guarantee states). The health care coverage providers and Health Insurance Carriers will adjust the premium to offset the perceived additional risk a person with certain medical conditions may pose (Morbidity Tables). For those in good health with no recent health issues the probability is that you will be able to save money on your health premiums by seeking an individual/family plan. You may also be able to save even more by perhaps reducing the level of coverage.

If you have any concern about the ongoing financial stability of you previous employer that might cause the company to either cancel the group plan or go bankrupt, you would be wise to seek an individual/family plan as your qualification for the COBRA coverage terminates in such a situation.  For example, you have been paying your COBRA premiums and your ex-employer files for bankruptcy or terminates the group plan, then your COBRA coverage will also be terminated! 

Finally, everyone should consider that the best plans at the best price are available to those with the best health. Those staying on COBRA because they are too busy or lazy to take the time to seek a replacement plan may find themselves with few options once COBRA is exhausted, if your health condition has deteriorated. HIPAA is available, but most HIPAA plans are quite limited in scope and very expensive considering the value of the overage. The time to investigate you alternatives is now. You should contact a Licensed Certified Field Broker/Agent ( Click Here) to assist you once you have gained the insight you need from this site.

What is HIPAA and who qualifies?

HIPAA is also an acronym which stands for a federal law enacted in 1996 entitled Health Insurance Portability and Accountability Act. The primary purpose of the legislation was to establish strict rules and enforcement measures to protect the privacy of patient medical records. However, included in the law are specific requirements of all health care plan providers and health care insurance carriers to provide coverage for those who have fully exhausted their COBRA coverage eligibility. It is important to note that HIPAA does not extend COBRA coverage. HIPAA simply guarantees a qualified individual that the all licensed health care coverage providers or insurance carriers must offer a guaranteed issue policy to you. It is a means to make sure that a person can get coverage, but it is no assurance of the cost or “value” of the policy. In order to be eligible for a HIPAA guarantee issue policy you must meet all of the criteria listed below:

• Have completed a total of 18 months of participation in a COBRA plan without a break in coverage of more than 63 days;
• Your most recent coverage must have been under a group health plan, government plan, or church plan;
• You cannot be eligible for coverage under any group health plan, Medicare or Medicaid, and must not have other health insurance coverage;
• Your most recent coverage cannot have been terminated due to fraud or nonpayment of premiums; and
• If COBRA or Cal-COBRA coverage was available, it must have been elected and such coverage must have been exhausted.

You must satisfy all of the above criteria.

The qualified candidate (and dependents) must apply for a HIPAA eligible health care plan within a 63 day window of opportunity that starts the day after COBRA coverage ended. The application must be dated before the 64th day. The candidate will need to complete a health application including a HIPPA eligibility document. The policy will be issued subject only to verification that the person was HIPPA eligible. If you want to verify whether you qualify or not, contact a Licensed Certified Field Broker/Agent ( Click Here) so they can help you determine your eligibility and tell you about the available HIPAA plans in your local area.

If you believe your rights under HIPAA have been violated, please contact the Department of Managed Health Care at 1-888-HMO-2219 or visit the Department’s website at www.hmohelp.ca.gov.