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- COBRA insurance is available to individuals who have lost their jobs
- There could be pre-existing exclusions
- COBRA is not a health insurance provider
COBRA insurance can be a real lifesaver if you are laid off or lose your job. But what happens when you don’t need it any longer?
If you are using COBRA health insurance and no longer need it, you can cancel it. When you sign up for COBRA insurance always make a note of any special requirements your policy may have for cancellation as many times, you will have to notify your previous employer in writing.
After your policy is canceled, you will receive a letter of termination and a certificate of credible coverage. This will show your dates of coverage and type of plan you had. You can use this with your new insurance provider to show proof there was no lapse in coverage and reduce or eliminated pre-existing condition exclusions.
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What is COBRA health insurance?
COBRA or the Consolidated Omnibus Budget Reconciliation Act was passed in 1986 to provide provisions for certain health benefits. It was an amendment to the Employee Retirement Income Security Act.
also, it was designed to help provide health insurance coverage in certain instances where coverage is lost due to termination of employment. This is to help while you search for a new job and to cover any waiting period you may have for new health insurance.
COBRA allows you to keep the health coverage your employer offered; it is not a health insurance provider. You will be required to follow the rules set forth by the insurance company for receiving services and filing claims.
COBRA may cost more than your employer-sponsored health insurance. This is because employers usually pay a portion of your health care plan.
COBRA is sometimes cheaper than a private insurance plan, though, depending on your eligibility in the marketplace.
When you switch to COBRA coverage you will be required to pay your portion, your employer’s portion of the premiums, and sometimes even a small administration fee in most cases.
Are there penalties for canceling COBRA?
If you cancel your coverage before you become eligible for new insurance, they may not honor the certificate of coverage. They can write pre-existing coverage exclusions on your new policy.
You may also have to wait up to a year before they will pay for any treatments related to these conditions. This will apply to your spouse as well if they are covered under your plan.
COBRA premiums are based on how your previous employer pays for their company health insurance plans. Payments cover 30 days of coverage and may not be prorated or refunded if you cancel in the middle of coverage month.
Who qualifies for COBRA health insurance?
Not all companies have to offer COBRA coverage. The law is designed to cover companies who maintain health insurance coverage on at least 20 employees.
The company has to continue to offer group health insurance as well.
This law applies to health care plans for private businesses and some state and local government plans. It does not apply to any federal government sponsored health plans, and some church organizations are exempt as well.
To qualify for COBRA, you must have health insurance with your company before you go through a qualifying event. Loss of your job is a qualifying event.
It can be voluntary or involuntary. The exception is if you are terminated for gross misconduct or illegal activity.
If your hours are reduced from full time to part time, you may also qualify. The reduction in hours must cause you to lose eligibility for benefits.
If you have a health insurance plan that covers your family, they will continue to receive benefits when you qualify for COBRA. Your spouse can also apply for COBRA if you pass away or divorce. Any dependent children would also be covered.
If you become eligible for Medicare, your spouse, and dependent children can apply for COBRA benefits. This would allow them to continue their benefits until they can find new ones.
How does COBRA health insurance work?
Your employer is required by law to notify you of your COBRA eligibility and notify their insurance provider. The provider will then send you information on enrollment and costs. You will be given 60 days to decide if you want the coverage. See below for a few things you need to know:
- If you chose COBRA coverage, you would have 45 days to make your first payment.
- You will be required to make any premium payments you missed during the 60-day enrollment period. Payments are due every 30 days after that.
- If you have a medical emergency during your 60-day enrollment period, you can get retroactive coverage.
- The coverage will be backdated to the date you lost your coverage, but you must enroll during the first 60 days.
You can maintain your coverage for up to 18 months provided you continue to pay your premiums and your former employee offers group insurance to current employees. Failure to make payments can result in loss of coverage.
If you become physically challenged, you can file for an 11-month extension of benefits. However, the cost of benefits will go up significantly during this period. The standard rate 102 percent of the plans cost with a disability it will cost you 150 percent of the plans cost.
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