How to Apply For COBRA Insurance and Subsidy

Written by James Hirby | Fact checked by The Law Dictionary staff |  

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is health insurance coverage that most employer are required to manage for an employee that is laid off, not fired.  The “manage” is due to the fact that the employer usually pays none of the cost of COBRA that the former employee takes on.  This makes this situation an expensive one for the former employee.  COBRA must be available to the former employee through the employer for a minimum of 18 months.  For a period of time in the recent past, from 2009 through 2011, the Federal government subsidized about 65 percent of the cost for many people who were carrying COBRA.  The subsidy has not been renewed for 2012 or 2013, as yet.  The COBRA Health Insurance Continuation Premium Subsidy was begun in the Recovery Act in 2009 and established an employer-provided health insurance continuation that ended in 2010-2011. 

Applying for COBRA is fairly simple.  The former employer is required by law to provide information and application to COBRA within 30 days of the former employee’s termination date.  The former employee can accept or decline the offer.  The former employee is eligible for COBRA even if the spouse of the former employee has health insurance coverage that can also be configured to cover the other spouse (the former employee) or if the former employee  is eligible for Medicare.  Questions and concerns about COBRA can be addressed through the employer’s contact services for its healthcare services.  There is also assistance to be found online at several sites.

COBRA does offer various configurations, each with its own costs.  Medical insurance is possibly eligible for tax deductions on schedule A of the US tax law if the former employee’s financial situation allows for it.  One should check with one’s financial expert on how and when and if this applies.

Once COBRA coverage expires for the former employee, there are options, some unsavory.  One is to take on individual coverage costs through the former employer.  It is bitterly expensive.  Another option is to roll one’s coverage into another provider.  This may alleviate a little bit of the cost, but it is still likely to be very expensive coverage.  Another option is gaining coverage through HIPPA.  HIPPA (Health Insurance Portability and Accountability Act of 1996) contains provisions that generated a type of a safety net for insured employees who had left their employers in good standing, having been laid off.  To be eligible for HIPPA:

  • The former employee must have no other health insurance coverage or be covered by health insurance due to terminate for reasons not within the employee’s control.
  • The former employee must have been insured with a provider such as COBRA, for the past 18 months with no lapse in coverage of more than 63 days.
  • The former employee must have been insured by a group, governmental or church plan, or an individual plan that terminated from insurer’s ceasing to do business or having moved out of the insurer’s service area.
  • The most recent coverage cannot have been terminated by a lapse in payment, fraud or some type of misrepresentations.
  • The former employee must not be eligible for other group health plans, Medicare or Medicaid.
  • Group continuation or COBRA continuation benefits must be exhausted; if neither was offered by one’s former employer, contact the health insurance advisor for a complete set of HIPPA rules.

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