What does COBRA stand for? "COBRA" stands for the "Consolidated Omnibus Budget Reconciliation Act." The law, passed by Congress in 1986, allows an employee to extend the coverage of a group health insurance plan for a temporary period, even after leaving his job.
How It Works
When an employee leaves a job, such as through layoffs or quitting, he can take responsibility for paying the premiums and staying on the company health insurance plan for a maximum of 18 months. The coverage can also extend to a spouse and dependent children. COBRA coverage can be used to bridge the gap between jobs or to secure an alternative health care policy. A spouse and dependent children can also qualify for COBRA temporarily in the event of a divorce or the death of the employee.
History Of COBRA
In the early 1980s, the federal government grew increasingly aware of the hardships placed upon employees to secure health insurance, especially after losing a job or worse, losing an employed spouse. The Consolidated Omnibus Budget Reconciliation Act essentially replaced the Employee Retirement Income Security Act of 1974 when President Ronald Reagan signed it. The official name of the act includes the date "1985" but because it was not enacted until 1986, the act is most commonly referred to as COBRA to avoid confusion.
Due to an increase in job layoffs in the midst of an economic recession in 2008 and 2009, President Barack Obama signed into effect the American Recovery and Reinvestment Act of 2009. This act increased government subsidies of the COBRA premiums to around 65 percent. Prior to this act, former employees were responsible for 100 percent of the continuation of benefits premiums. Eligibility requirements include involuntary termination of employment (such as layoffs and company bankruptcies) and the inability for a person to get any other group health insurance option. Income restrictions also apply; if the individual's income exceeded $250,000 (married filing jointly) or $125,000 (single), that person would also be enrolled in a repayment plan for that subsidy.
How does COBRA work? COBRA allows people who have left a job or who have been laid off to pay a monthly fee and keep their health care coverage for a certain period of time.
What is an insurance deductible? This is the amount you have to pay out of pocket any time you use your insurance, and the deductible you choose might impact the premium you pay each month.