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 Lowers COBRA Premiums

The American Recovery and Reinvestment Act of 2009—known as the "Stimulus Bill"—could cut your COBRA premiums by 65 percent.

You qualify for this premium subsidy if you:

  • were forced to leave your job between Sept. 1, 2008, and December 31, 2009
  • were eligible to receive COBRA coverage at the time of your termination

The discount applies only to the first nine months of COBRA coverage. You can receive COBRA benefits for up to 18 months.

The Stimulus Bill also gives you a second chance to sign up for benefits. Employers are required to notify you of this opportunity. You will then have another 60 days to make up your mind. The period for your COBRA benefits will not be extended, though. The original 18-month timeframe still applies. Employers are required to notify former employees of this second election period by April 18, 2009.

If you are already paying for COBRA, you are eligible to begin receiving the discount from the date the Stimulus Bill was signed, Feb. 17, 2009. Contact your employer or plan administrator for information.

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.