Using COBRA to Keep Your Health Insurance

You may be able to keep health insurance for yourself and your family during a period of unemployment. COBRA has very specific requirements. Talk to your company's human resources department for details on how your employer handles the transition to COBRA coverage.

To be eligible for COBRA insurance: 

 

  • You must have been enrolled in your company's health plan while employed. Furthermore, the plan must continue to operate after you are no longer employed.
     
  • You must elect to take COBRA coverage once you have been notified that you are eligible by the later of the 60th day after the written notice is sent or the day your health coverage ceases under the company's health plan. If you fail to respond, you and your family will lose your right to COBRA benefits.
     
  • You must pay the premium that you were already paying plus the amount that was paid by the company. There may be additional administrative fees—possibly up to 2% of your premium. Even if this seems high, you are still paying group premiums instead of individual premiums, which are usually higher. 
     
  • You must pay the full premium on time. Failure to make your full payment on time will result in termination of health insurance. Generally, you will not be able to recover coverage by making the payment after your coverage was terminated.
     

Stimulus Bill Amended to Extend Eligibility Period for COBRA Subsidy and Increase the Maximum Period for Subsidized Coverage


Reduced COBRA premiums, set to expire at the end of 2009, were extended in 2010. The reduced premiums were established under the American Recovery and Reinvestment Act of 2009, also known as the “Stimulus Bill.” The Department of Defense Appropriations Act of 2010 extends eligibility for the 65 percent reduction in premiums through May 2010 and the coverage period by another six months. These changes affect coverage for both newly unemployed individuals and those whose subsidized COBRA coverage ended before the extension was signed into law.


You qualify for this premium subsidy if you:

  • lost your job involuntarily between September 1, 2008, and May 31, 2010; and
  • were eligible to receive COBRA coverage at the time of your termination.


The discount now applies for fifteen months (formerly, nine) of COBRA coverage. You can receive COBRA benefits for up to 18months.

 

Plan administrators must provide notice of the extended periods to individuals who became eligible for the subsidy on or after October 31, 2009 within 60 days of the effective date of the amendments or the applicable COBRA notification date if the qualifying event occurs after the effective date.

 

Plan administrators must also notify individuals who had reached the end of the original nine months of reduced premium coverage to inform them of the extended coverage period and the ability to make retroactive premium payments to maintain coverage for the full 15 months now provided by the amended law. These individuals may have to make retroactive payments within 60 days of the effective date of the law or 30 days of the notice, if later. Check with your plan administrator regarding your eligibility to receive coverage for the extended period.

 

Accepting the premium reduction disqualifies you for the Health Coverage Tax Credit, which could be more valuable for some taxpayers. And if you make more than $125,000 ($250,000 for joint filers), you may have to repay some of the premium reduction at tax time. Visit the Department of Labor for details.

 

For more information visit the website for the Department of Labor's Employee Benefits Security Administration (EBSA): www.dol.gov/ebsa. The EBSA is charged with protecting the integrity of pensions, health plans, and other employee benefits.