Details

• COBRA, which was signed into law in 1986, provides employees the option of purchasing group health-care insurance for up to 18 months after leaving their previous job. The insurance is usually more expensive than coverage through an employer because COBRA participants pay the entire premium themselves. It is ordinarily less expensive than individual health-care insurance, however, according to the U.S. Department of Labor. COBRA usually does not apply to businesses with fewer than 20 employees. Participants must elect the option within 60 days of leaving their job or they lose rights to the coverage.
  
  

Qualifications

• Participants qualify for COBRA when they leave their job voluntarily or involuntarily for reasons other than gross misconduct or if they receive reduced hours at their job. Spouses and dependent children are also eligible for COBRA if the participant becomes eligible for Medicare, or get a divorce, legally separated or dies. Participants can become eligible for extended COBRA benefits if they become disabled and the U.S. Social Security Administration determines that the disability happened within the first 60 days of COBRA coverage. Those who qualify can receive up to 11 additional months of COBRA coverage for a total of 29 months.
  
  

Benefits and Costs

• COBRA participants must receive the same health-care coverage as the employees at their former workplace. They are also subject to the same rules and limitations under their former employer's plan, such as co-payment requirements and deductibles. Participants can not be charged more than 102 percent of the cost of their former employer's plan. However, those who receive the disability extension can be charged up to 150 percent of the total coverage cost during the extension period.
  
  

American Recovery and Reinvestment Act

• Under the American Recovery and Reinvestment Act, COBRA participants who were eligible paid 35 percent of the COBRA premiums and the remaining 65 percent were reimbursed to the health care provider through a tax credit. The premium reduction was only temporary, however, from a coverage period of February 17, 2009, to May 31, 2010, and it only provided the reduced rate coverage for 15 months. Those eligible for Medicare or other group health-care insurance through a spouse or new employer were not eligible for the premium reduction. Anyone receiving the premium reduction who earned more than $145,000 in adjusted gross income for the year they received the benefit had to repay it.