COBRA Checklist

01/19/2009 05:12 am ET | Updated May 25, 2011

If and when you ever visualize a cobra, you probably imagine a hooded snake, head erect and spitting it's venom half it's length. That reptilian fantasy aside, there is another COBRA you're more likely to encounter in the prevailing economy. This acronym stands for the Omnibus Budget Reconciliation Act. That landmark legislation passed by Congress 22 years ago provides continuation of group health coverage that might otherwise be terminated when someone leaves a job.

Who does COBRA cover? It covers certain former employees, retirees, spouses, former spouses and dependent children of private sector companies with 20 or more employees. Most states now have so-called "mini-COBRA" laws including employees at even smaller companies. Those eligible for COBRA protection have 60 days from the time they are notified to apply. Coverage is generally a maximum of 18-months, but can be extended by certain circumstances such as disability or even divorce. In fact, some states such as New York, Texas and California have special provisions allowing up to 36-months.

How much does it cost? More than the amount paid by active employees because the employer absorbs part of that and because there is usually an administrative fee. However, COBRA coverage is almost always less expensive than purchasing an individual health plan.

If you've never had to deal with COBRA before, good for you because this probably means you've never lost your job. If this is all new to you, then there are some things you may not know. For example, YOU DON'T HAVE TO BE FIRED to claim COBRA coverage. You can leave your job voluntarily and you, your spouse, and your dependents are still eligible.

There are also some other triggers for COBRA eligibility: reduction in work hours, qualification for Medicare, divorce, legal separation or death of the covered employee.

Believe it or not, here are some of the slithery but common problems you may encounter. You paid your COBRA premiums, but the insurance company never received them. Contact the United States Department of Labor, the agency that administers COBRA. This is really an issue involving the insurance company and your former employer, but the USDOL can investigate and get to the bottom of things. This is self-protection on your part because the insurance company could drop your coverage and it is not required to notify you of that.

Another scary scenario, you paid your premiums, but your doctor says you don't have coverage. Immediately contact your plan administrator. This is typically a paperwork-processing problem and your COBRA status may not have made it into your insurer's computer system.

The real snakebite of course is if your former employer goes out of business or cancels your health insurance plan. In this case, the group that formed the foundation for group coverage no longer exists and neither does your eligibility for COBRA. Start looking for alternate health insurance right away.

The anti-venom for the next problem can be quickly administered if you know your rights. In this case, your former employer switches plans and fails to tell you. You should contact the health plan administrator right away, since there is a legal obligation to keep you informed.

Now here's something that should make you feel good, when everything else about your lack of employment is making you feel bad. You're entitled to the same health insurance rights as active employees during the "open enrollment period." You can make changes, even switch plans just as they can.

Just in case you didn't know this, leaving town will force you to exit from COBRA.

Many health insurance plans require that you use local provider networks. Your employer does not have to offer you a plan elsewhere. So, if you want to keep your COBRA benefits, don't relocate without a new job with benefits. Remember, knowing how to duck when the COBRA strikes is the key to survival.