How does COBRA work?

May 11 2021

It is natural for a job layoff or termination – especially one that feels discriminatory, retaliatory, or just plain unfair – to bring a wave of emotions and questions about the future. One of the first questions our clients often ask us: What am I going to do about my health care?

The short answer is that you have options.

You’ve probably heard that your employer will extend your employer-based health insurance coverage through “COBRA,” an acronym for the Consolidated Omnibus Budget Reconciliation Act. This federal law requires certain employers – those that employ 20+ people and have private group health plans – to offer the same health insurance to covered former employees and their spouses, former spouses, and dependent children for a period of 18 months (with a Medicare-related 36 month exception).

Connecticut’s laws are even more expansive than COBRA. In Connecticut, all employers that offer group health insurance plans are required to provide extended health insurance coverage, regardless of how many people work at the company. Connecticut State Continuation also applies to all employers: private, public, non-profit, and religious organizations. And in Connecticut, a former employee can get extended health insurance coverage for up to 30 months.

Termination is not the only action that implicates COBRA. A reduction of hours or extended leave may also trigger a loss of health care benefits, and that can implicate continuation rights.

Although COBRA and its state-law equivalents provide the important opportunity to maintain health care coverage, people are often surprised (and dismayed) that maintaining this coverage can be very expensive. This is because the employee’s monthly health insurance payments don’t usually reflect the actual cost of the plan; the employer often pays for a significant portion of the employee’s health insurance. Under COBRA, the employee has to pay the full cost, plus a 2% administrative charge.

If the cost to extend your coverage is prohibitively expensive and/or your employer’s health insurance plan wasn’t that great to begin with, you still have other options. You may be able to join another group insurance (such as your spouse’s insurance), purchase an individual plan on the Health Insurance Marketplace (under Obamacare), or use Medicaid. Beware, though, that the Marketplace deadline is 60 days, and employers must give you at least 60 days to decide if you want to take COBRA – so think of Day 60 as the guidepost for making your decision. This can get tricky when you need time to decide, but you also need to see the doctor. It may be helpful at this moment to speak with HR or a lawyer.

Another important consideration is whether you received a severance package. Severance packages often provide weeks (or even months) of COBRA paid in whole or in part by the employer. But also remember that severance packages typically require you to waive your legal rights against the company. So if you believe you might have a discrimination, retaliation, or breach of contract claim against your employer, you should contact a lawyer before signing away these rights.

At Garrison, Levin-Epstein, Fitzgerald & Pirrotti, P.C., we can help navigate you through these challenging decisions.

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