What Is COBRA?

When an employee loses his job, he has the option to continue his health coverage from his previous employer. Under the 1986 Federal Law, a company that has 20 or more employees should give an option to a laid-off employee to pay extended health insurance coverage for at least 18 months after his job termination. This law is called the Consolidated Omnibus Budget Reconciliation Act or COBRA.

If an employee has been laid off, the employer must inform the employee, in writing, of his rights under the COBRA law. From the date of the notice, the employee is given 60 days to decide if he would like to continue the coverage under COBRA. However, if you own a business which became bankrupt, the COBRA policy would not be able to help for it does not cover such case.

If the employee decides to be covered by COBRA, the terms and conditions in your previous health plan when you were still employed will be the same as the health insurance under COBRA. However, you will be asked to pay the premium plus the amount that your previous employer was paying. The employer is also allowed to add 2% administrative charges.

COBRA can be very costly depending on your current situation. Individual coverage may cost around $400 per month, while a family coverage may cost more than $1,000 per month. The amounts will depend on the benefits of the health plan that has been provided by your employer.

For example, Mr. X was laid off from his job as a receptionist in a call center company. Before he was laid off, his monthly premium for his health plan was around $400, where he paid 30 percent of this amount, which is $120. While her employer paid 70 percent of the premium amounting to $280. Mr. X decided to enroll in COBRA after he was laid off. The monthly fee she now needs to pay is $408 ($400 is the total premium paid by both employer and employee before being laid off plus 2 percent administrative fee, which is $8.)

Paying a premium of $1,000 per month is a lot of money, and it is probably more than what a person expects to pay. Losing a job and paying $1,000 can be tough to handle. Some workers have to pay 60 percent to 70 percent from their monthly unemployment check. Workers that are being laid off and eligible to continue their health insurance under COBRA choose to discontinue since they can’t afford to pay the monthly premium.

If you can’t afford to pay the monthly premium for COBRA, there are other alternatives for you and your family. Research from the internet other possible alternatives. If you and your family members are healthy, there’s a possibility that you can get a health insurance that has a high deductible health plan that you will be able to afford. You are given 60 days to decide after you’ve been laid off, whether you would like to continue your health plan with COBRA. Before deciding, schedule a meeting with your insurance agents, and learn more about other options.