The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires health plans to continue to offer insurance coverage to employees who have been terminated or “laid off.”

The catch is that the employer is no longer obligated to pay the majority of the premiums. In fact, they will most likely pay nothing. It is all on the employee. Needless to say, the ability of the average person to pay 100% of a family’s health insurance premiums is significantly impaired by the fact that he or she has just been let go. Failure to make the monthly premium payments by the ex-employee will result in the termination of coverage.

Fortunately, the American Recovery and Reinvestment Act of 2009, signed by President Obama on February 17, 2009, includes a 65% subsidy of health insurance premiums for ex-employees for up to 9 months if termination of employment occurred between September 1, 2008 and December 31, 2009. This means the federal government will pay 65% of your health insurance premiums. This is a great deal.

The Department of Defense Appropriations Act of 2010, signed by President Obama on December 21, 2009, extended the COBRA subsidy from nine months to fifteen months. It also extended the layoff eligibility date to those affected on or before February 28, 2010.

COBRA cannot require an insurer to continue to provide coverage if the employer drops group coverage or if the loss of employment is caused by the closing of the employer’s business altogether.

There are several “qualifying events” that determine eligibility for COBRA coverage:

  1. The loss of employer-based group health insurance coverage from voluntary resignation, reduction in hours below health insurance eligibility level, involuntary termination (except for extreme adverse misconduct or behavior), layoff, strike, or prolonged illness and medical leave.
24 // The Medical Bill Survival Guide