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When do medical benefits end after termination?

Keep in mind...
  • Most people can continue their health insurance after termination, as long as they were laid off instead of quitting or being fired
  • Usually, benefits can be continued for up to 18 months, but there are exceptions
  • It is important to note that former employees usually have to pay the full monthly premiums with no help from their former employer. This may be difficult for some people

Many health insurance issues are more complex than people initially think, and the issue of medical benefits after termination is no exception. The law that covers the continuation of medical benefits after termination is called COBRA.

COBRA generally allows people who have left a job to keep their health coverage from between 18 to 36 months after leaving the job. However, there are many conditions that need to be met for the coverage to continue.

There are also many stipulations that are part of the law which people who are looking into this issue should know about. To learn more about medical benefits continuing after termination, read on.

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The Continuation of Medical Benefits

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Most people who leave a job which offers health insurance will be able to continue their benefits for a certain length of time. This was not true till the mid-1980s. There was a lot of debate going on about passing laws that would ensure the continuation of health benefits. However, it did not happen for decades. Finally, the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA, was passed.

This act is considered to be one of the most important laws ever passed by Congress. There have been calls to end it, but there’s never been a serious attempt to repeal it. However, it has been somewhat modified.

Originally, employers that didn’t continue health coverage were charged by not being able to deduct health insurance coverage when they filed taxes. Now, they are subject to an excise tax. Nearly all applicable employers follow COBRA.

COBRA

The term COBRA was originally coined to refer to the act but now refers for the most part to the continuation of medical benefits after termination. COBRA specifies that benefits must be continued for employees and their immediate family members.

In most cases, COBRA coverage lasts for up to 18 months. However, it can last for up to 36 months. Not all people who have recently left a job are eligible for COBRA.

The employer must have offered a health plan in the first place. Also, the qualifying event that led to the end of employment must meet the specifications of the law.

How the Type of Termination Matters

If you are fired for cause or quit, you are generally not eligible the continuation of health insurance. COBRA insurance most commonly applies when the employee is laid off. However, they may still be able to continue health insurance if you are fired or quit as the results of discrimination or other illegal actions.

Qualifying Events

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There are other qualifying events that allow somebody to continue their health insurance coverage besides getting laid off. If an employee with a health insurance plan covering their immediate family members dies, their family members can continue their coverage.

Also, if the spouse of an employee with health insurance gets divorced or legally separated, they can continue their coverage. Finally, a dependent child can continue their coverage through COBRA after they reach the age in which they cannot be on their parent’s health insurance plan.

The Length of Continuing Coverage After the Qualifying Event

In most cases, coverage continues for 18 months at most. However, there are exceptions to this. If the individual is ruled to be disabled by the Social Security Administration, the benefits can continue for up to 29 months.

In the case of a divorce, the former spouse’s coverage can continue for up to three years. If the employee with the health insurance policy dies, the living spouse’s coverage continues for up to three years as well.

Events That Can End the Continuing Coverage Early

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The most common event that can end continuing health insurance coverage early is getting another job. Getting a job does not necessarily end continuing health insurance coverage. The job must offer a health insurance plan for COBRA end. This is because the employee now has another health insurance option. Continuing medical benefits can also end if the premiums go unpaid.

Written notice of at least 15 days must be provided before continuing health insurance it ended due to non-payment. Unfortunately, many people who do choose to utilize COBRA coverage are unable to pay their premiums. This is because they must pay the full amount of the premium rather than have their former employer subsidize it.

Combining COBRA with Another Health Insurance Plan

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It is possible to combine COBRA with another health insurance plan. However, there are two fairly restrictive conditions that apply. The individual needs to meet one of them to be able to combine continuing health insurance and their former employer with another plan.

Either the other coverage must have already been in effect at the same time or prior to the continuing health insurance coverage starting or the other plan needs to have limitations regarding pre-existing conditions. The other plan besides the continued health insurance plan can be a private insurance plan or Medicare.

Final Thoughts

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In conclusion, most people leaving a job will be able to continue their health insurance for 18 months. However, the law does not require former employers to contribute to their former employee’s health insurance plan, and many of them do not. This means that many people who are laid off cannot afford health insurance unless they compare health insurance quotes online and get a good deal.

President Obama did sign into law a bill subsidizing continuing health insurance benefits, but this law has since expired and there is no expectation that it will be reenacted. If you are laid off, you may want to look elsewhere for your health insurance needs. COBRA may not be the right option for you.

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