Let’s face it, the economy is tough and jobs are being eliminated as employer face tough economic times. Several of my friends have been laid off and have called me asking for advice. Here is Gary’s story.
Gary is an intelligent, confident man. He was working as a middle manager for a very reputable company. He and Mary, a stay at home mom, were expecting their second child in the fall. Things were going well, and then the company eliminated his position. After the big shock, he called me asking for advice.
Cobra is the world’s largest venomous snake; in this case, COBRA isn’t a reptile. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1986. While it is not insurance, it is the law that gives the individual the right to choose to keep group health insurance benefits lost after a qualifying event such as job loss or reduction in hours. Since his employer has more than 20 employees, he would qualify for COBRA continuation benefits.
When he received his notice from the COBRA Administrator, he was overwhelmed. The notice explained his rights under the law. I told him that he did not have to act right away but that he had 60 days to notify them in writing. After the coverage is elected, he would have an additional 45 days to pay retroactively to the date of the qualifying event.
He stated that he could not afford the full cost of COBRA. COBRA is expensive because typically employee benefits are subsidized by employers. The contributions toward the employee and dependent premium can vary depending on the employer. When somebody qualifies for COBRA, the employer contribution vanishes thus the hike in price. By law, the administrator can charge an additional 2% to cover admin expenses.
I further explained that he could keep the coverage for up to 18 months. Some people if they qualify may be able to keep it a few months longer. ;For example, those who have a formal disability determination by the Social Security Administration may qualify for an additional 11 months but the plan could charge 150% of the cost. Also, dependents that lose coverage due to a change in the family such as a divorce can still get COBRA coverage for up to 36 months.
We met to review his options which were to enroll in COBRA or go elsewhere. After reviewing cost, benefits and needs, I recommended the following: since Mary was expecting, she would be uninsurable in the individual market. I explained to them that even though she was a dependent, she could elect COBRA for herself. Since Gary and Timmy were in good health, they could get an individual policy. Also, they had dental coverage thru his work. Group Dental typically is better than individual dental, so I suggested electing family dental coverage under COBRA.
By doing this, they saved around $ 400 per month, provided maternity coverage for Mary and had good dental coverage for up to 18 months. When Mary delivers, they can either get a new policy for her and the newborn or apply as a family elsewhere. We will have to see then. This solution has given Gary and his family peace of mind that they have good insurance coverage while he is looking for gainful employment.
One more thing. What if you work for a company that has less than 20 employees? In Georgia, we have state continuation which is similar to COBRA but it only lasts 3 months. Each state is different, so consult your local insurance agent for more details.
For more details, go these helpful links.
http://www.dol.gov/dol/topic/health-plans/cobra.htm
http://www.dol.gov/ebsa/pdf/cobraemployee.pdf
Need personal advice for health, dental, life, and disability, long term care insurance or senior benefits call Al Schiebel at 404-256-2171 or email al@shopbenefits.com.
