Understanding COBRA

If employers choose to provide health insurance, we have to abide by the Consolidated Omnibus Budget Reconciliation Act (COBRA) law. COBRA is a law that requires employers to offer to maintain health insurance on individuals who leave their employment (for a period of time). The individual former employee has to pay for the insurance, but the employer is required to keep the former employee on their group insurance policy. Why would a former employee want to remain on the company’s health insurance policy? Primarily because buying an individual health insurance policy is much more expensive than buying insurance for a group of people. So this option will save people money over buying health insurance on their own. Another reason is that in most cases, people don’t leave one job and start another on the same day, so they will have a gap in their health coverage if they don’t utilize COBRA coverage. COBRA allows coverage after termination of employment for at least 18 months and for as many as 36 months in some limited cases. This period is usually sufficient to allow an individual to leave one job, gain employment elsewhere, and switch to the new employer’s health care plan without losing health coverage for themselves and their family. COBRA applies to companies with 20 or more full-time equivalent employees. It is required to be offered to both terminated employees and those who voluntarily quit, in most cases.