COBRA Coverage: An Important Issue for Employers and Employees
by Ron Jackson
Most people have probably heard or seen the term “COBRA” in the workplace, but have little idea what it means or why it is important. It refers to the Consolidated Omnibus Budget Reconciliation Act. This law guarantees the right of an employee to continue the health insurance which the employer provided after the employment terminates. Employer health insurance usually terminates upon the termination of employment. Despite the Affordable Health Care Act, most people continue to obtain health insurance through their employer. The loss of a job typically also means the loss of the employee’s health insurance.
COBRA requires the employer to offer the employee continued coverage on the employer’s health plan. However, the employee usually must pay the full cost for the health insurance. While the cost of COBRA coverage can be substantially more than the employee paid while employed with the company, it is not always expensive. In addition, even if the employee did not immediately sign up for COBRA coverage, this insurance may still cover medical expenses the employee incurred before electing COBRA coverage. In one recent case, the employee had critical surgery scheduled a few days after the employee was terminated. The employee was not told when she was terminated that she could elect to continue her health insurance through COBRA and it would cover her surgery costs even if the surgery occurred before she had signed up for COBRA coverage. As you can imagine, this employee was distraught and actually cancelled one of the surgeries because she did not think it would be covered by insurance and could not afford the cost herself.
The employer is required to advise the employee of COBRA coverage within 44 days after the date the employee is terminated. However, employers should not wait to inform terminated employees of COBRA coverage, and should provide this information as part of the exit interview or other termination procedures. For the employee, it is important to be proactive in obtaining information about COBRA coverage and understand the coverage will be retroactive to the date the employer’s coverage terminated.