Qualifying events and COBRA: What does it mean for you?

Employer-sponsored health plans offer a safety net that provides peace of mind, but life is full of unexpected twists and turns. What happens when your employment status changes, and you face the possibility of losing your health coverage? That’s where the COBRA comes into play.

What is COBRA?

COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal law that grants certain employees and their families the right to continue their group health insurance coverage. COBRA acts as a bridge that covers health insurance gaps, making sure that you can maintain insurance coverage when you’ve experienced a COBRA-qualifying event, as long as you meet specific criteria and continue to pay your premiums.

What are qualifying events?

Qualifying events are specific life events that result in the loss of your current health coverage. Qualifying events differ depending on whether you’re an employee or a family member. And it’s important to note that not all employers are required to offer COBRA.

For employees, common qualifying events include:

• Termination of employment: When you leave your job for any reason other than gross misconduct, you qualify for COBRA coverage.
• Reduction in hours: If your working hours are significantly reduced, and this impacts your eligibility for employer-sponsored health coverage, it is considered a qualifying event.
• Employer bankruptcy: When your employer declares bankruptcy, resulting in the termination of your health coverage, in some circumstances you may be eligible for COBRA.

For family members, qualifying events include:

• Death of the employee: When the covered employee passes away, their family members can continue the health coverage through COBRA.
• Divorce or legal separation: If the employee and their spouse legally separate or divorce, it’s considered a qualifying event for the spouse.
• Dependent child aging out: When a dependent child no longer qualifies for coverage under the parent’s plan due to age or other factors, it’s a qualifying event.

Will my employer notify me if I’m eligible for COBRA?

Employers are legally obligated to notify both the employee and any covered family members about their COBRA rights within a specific timeframe. It’s equally important for individuals and family members to remember to update any address changes to ensure they receive these notifications. Once you’re aware of a qualifying event, you generally have 60 days to elect COBRA coverage. 

Do I have to pay for COBRA?

While COBRA provides a safety net for preserving your coverage during transitions, it comes at a price. In most instances, individuals and families choosing COBRA coverage are responsible for the entire premium amount. This can be significantly higher than what you were paying as an active employee. Nevertheless, COBRA lets you retain the same health coverage you had as an employee, including the same healthcare providers and services. 

How long does COBRA last?

The length of COBRA coverage is dependent on the type of qualifying event:

• Termination of employment or reduction in hours: In these cases, COBRA coverage typically spans 18 months.
• Familial qualifying events: For events like divorce or a dependent child aging out, COBRA coverage can extend up to 36 months.

It’s crucial to understand these timelines and plan accordingly. After your COBRA coverage period concludes, you may need to explore alternative health insurance options. 

If you want to learn more about COBRA, check out this handout.

The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers. 

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