Wednesday, March 16, 2005

A COBRA Primer (Part 1)…

The Consolidated Omnibus Budget Reconciliation Act of 1986, aka COBRA, was a landmark piece of legislation. One of the primary benefits of this law is that it provides for a continuation of group health coverage that otherwise might be terminated.
In English, this means that, if you lose your job, you don’t necessarily lose your insurance. This is important because, if there’s an ongoing medical condition, the coverage stays in force (at least for a while).
Since COBRA is law, and not insurance, I tend not to answer a lot of questions about it.
Simple, really: I am not a lawyer, and I don’t play one on TV.
That means that if I advise a client – especially one of my groups – on a COBRA issue, and I’m wrong (which, believe it or not, does happen)(rarely), then I could be in big trouble.
OTOH, there are times when it’s appropriate to help folks who call me determine what to do in a given circumstance.
Please keep in mind that I’ll be dealing in generalities here, but hopefully in a way that will be helpful to folks who just want some general, simple information about this complex legislation (which changes all the time).
In general, if a company has 20 or more full time employees in a given year (note: not necessarily ALL year; if there are usually 18 employees, and the boss hires 2 more full time to help during the Christmas rush, then COBRA comes into play), then it will need to be compliant with COBRA. This means that each employee, and each of their covered dependents, has certain rights. The most important one, IMHO, is that each “beneficiary” (government lingo for “person with COBRA rights”) can keep their coverage in force, with no exclusions or restrictions due to pre-existing conditions, for at least 18 months.
Why the “at least?” Well, in general (there’s that qualifier again!), each person can keep the coverage for 18 months. But some folks (for example: disabled ones) can actually keep it longer.
The biggest drawback to COBRA, in my experience, is that nowhere in that acronym are the letters AAAP (“at an affordable price”). The beneficiary has to pay the full price for the coverage, plus an additional 2% to cover the previous employer’s administrative costs. If you’re used to seeing $25 deducted from each paycheck to cover the insurance, there’s a bit of sticker shock when you see that the real amount is $400. As happens.
Okay, I’m running long here, so I’ll pick this up in the next post. Meantime, please feel free to leave a comment (or send an email) if there’s a specific topic you’d like to see me cover.
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