COBRA Insurance: Medical, Vision and Dental Coverage

Did you lose your job or are you finally ready to give your two-weeks notice? You may qualify for COBRA insurance and COBRA Dental Insurance coverage while you’re looking for another job.

If you’re doing research on health insurance coverage before you become unemployed, congrats on being proactive! But, if you’re like most people, you might have been sent a COBRA insurance letter and are wondering what to do next.

The good news is that you have up to 90 days from the date of your termination to continue your current medical, vision and dental insurance coverage with COBRA. Before we jump into the details of your potential health and dental coverage benefits, you may be wondering: what is COBRA insurance?

What is COBRA Insurance?

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1986.

This act requires that employers with group health plans offer temporary group health insurance to their employees if coverage would otherwise end due to a change in employment status. To be eligible for COBRA insurance employees must meet specific criteria and trigger “qualifying events,” such as termination or layoff.

An important point needs to be addressed before we continue: COBRA insurance premiums must be paid by you while you carry this temporary insurance.

This may seem obvious at first, but most of the documentation online about COBRA insurance says that employers must “offer” temporary group health insurance to their employees. What this means is that employers must allow access to their group plan even though you are no longer an employee.

We’ll discuss the benefits of COBRA insurance below, but the primary benefit is the opportunity to continue coverage while you’re unemployed.

The other side of this situation is that you are now required to pay the group health insurance premiums. Often these plans can be very expensive for those that are now facing unemployment and an unpredictable job market.

COBRA Benefits

Employers that offer group health insurance often qualify for coverage that may not be available to you as an individual. COBRA provides the unique benefit of allowing you to continue group coverage until you can get individual health and dental insurance or qualify for coverage from another employer.

Depending on your situation you may qualify for COBRA insurance for 18 to 36 months. During this time you will continue to receive the same benefits, coverage and medical treatment you came to expect from your group health insurance plan.

Under the COBRA plan, qualified beneficiaries must be offered identical coverage to what they were receiving prior to losing their job or triggering a qualifying event. COBRA insurance plans also stipulate that beneficiaries must be given the same choices as non-COBRA beneficiaries.

The reason COBRA continuation coverage is so important is that it will help you avoid breaks in your insurance coverage.

Why does continuous coverage matter? If you have a 63-day lapse in health insurance coverage you could be subject to a preexisting condition exclusion when purchasing future health insurance plans. Having a certificate of creditable coverage will help you reduce or eliminate these preexisting condition exclusionary periods. Without continuous coverage from a COBRA insurance plan you may be subject to a preexisting condition for 12 months after your new health insurance enrollment date.

COBRA Dental Insurance

If your previous health insurance includes dental coverage you will be required to continue your coverage with COBRA. Bundled health insurance plans offered by your employer that include medical, dental and vision coverage cannot be separated. You are required to continue the exact same coverage your employer offered.

On the other hand, if your employer carried separate policies for medical, dental and vision, you can select which coverage you would like to continue.

Do I Qualify for COBRA Insurance?

To be eligible for COBRA insurance you must trigger the “qualifying event” requirement. These events include:

  • Death of a covered employee
  • Termination (other than by reason of the employee’s gross misconduct), or a reduction of
    hours, of a covered employee’s employment
  • Divorce or legal separation of a covered employee from the employee’s spouse
  • Covered employee becoming entitled to Medicare benefits under Title XVIII of the Social Security Act
  • Dependent child ceasing to be a dependent child of the covered employee under the generally applicable requirements of the plan and a loss of coverage occurs.

Many families use their group health insurance provided by their employer to cover their spouse and children. If you use your job and take advantage of COBRA insurance will it cover your family as well? The short answer is yes.

However, there are restrictions on who is eligible as a “qualified beneficiary” (someone who is covered under the plan).

  • Spouse
  • Dependent child of a covered employee
  • Covered employee

Electing to continue COBRA insurance coverage may benefit your spouse and dependent children after your job loss. Keep in mind that if you decide to turn down COBRA insurance and fail to select an individual plan within 90 days, your dependents may have a difficult time qualifying for insurance if they have preexisting conditions.

In addition, failing to complete the COBRA continuation paperwork before the 90 days is up will cause you to lose coverage. Anyone that does not continue their coverage may be subject to private insurance waiting periods and may be subject to restrictions on preexisting conditions.

How Long Does COBRA Insurance Last?

COBRA insurance is available to qualified beneficiaries and their spouse or dependents for up to 18 months when the employee would be ineligible for group health insurance after losing their job.

Employees that become disabled during the first 60 days of COBRA coverage may qualify for up to 29 months of coverage. The extension applies to the dependents of the disabled qualified beneficiary even if they are not disabled.

In addition, up to 36 months of COBRA coverage is available to the spouse of beneficiaries if they are faced with an employee’s death. This extended coverage is available to the spouse of the covered employee in the event of divorce or legal separation, too.

How Much Does COBRA Cost?

The purpose of COBRA insurance is to provide temporary coverage to anyone that will no longer receive group coverage from their employer. While this is a benefit for anyone that wants to maintain their current coverage, it may not be the most affordable option.

As an workplace benefit your employer may have covered part or all of your health insurance premiums. The real cost of this group health insurance may not have been obvious to you until you are faced with the entire insurance bill. Under the COBRA plan you will be required to pay the entire group health insurance premium in addition to a two percent administration fee.

At first glance, COBRA insurance rates may seem high. However, in most cases group insurance provided by your employer often has lower premiums than the alternative individual health insurance. Although the out-of-pocket expenses may be more than you expected, COBRA insurance provides excellent coverage and affordable premiums to those that might otherwise lose their health insurance due to a job loss or other qualifying event.

After losing your job, health insurance may be the last thing on your mind. Not to mention, money may be tight. Before signing up for COBRA coverage it is important to realize that your premiums will begin to accrue immediately after your termination. While it may take a month or two before the paperwork is submitted, you will still be responsible for paying the premiums during this period. In most cases the first insurance premium you pay will include a retroactive payment for the month or two prior. Keep this in mind when setting your health insurance budget, as you may face a large bill during the first official month of coverage.

Also, during the transition to COBRA coverage you may not receive a monthly statement. Be aware that it is still your responsibility to pay the insurance premiums even if you do not receive a bill from the insurance carrier.

While we attempted to cover the basics of COBRA insurance, there are obviously many restrictions and legal details that we could not elaborate on. For more information we encourage you to review the up-to-date documents available on the United States Department of Labor website. Your employer may be able to provide you with more information about the transition to COBRA continuation coverage.

The most important thing to remember is that you need to find a health insurance plan that meets your needs within 63-days. If you fail to do so you may face preexisting condition exclusions on your insurance plan and these could leave you with costly gaps in your health coverage.