What Happens When COBRA Ends

COBRA is an excellent law that allows people to stay on their employer's plan if they lose their employer's health coverage, including related benefits such as dental, vision, and prescription drug plans, due to termination or reduction in hours. However, the extension is normally only available for 18 months. Once that is ended, people still need health coverage and people with HCV are "uninsurable" in the open health insurance market.

There are two additional laws that can extend the period you can have health insurance. COBRA is a federal law that allows disabled persons to extend their COBRA coverage until Medicare starts. HIPAA contains a provision that allows a person to purchase an individual health insurance policy when their COBRA finally ends, regardless of their health history or medical condition.

COBRA -- If You Leave Work Due to Disability

COBRA has been amended to allow people, who had to stop work due to disability, to extend the time they can keep COBRA Continuation. Under this law, someone who qualifies may stay on their employer's COBRA Continuation until they become eligible for Medicare, which is normally 29 months after they leave work due to disability. This disability extension lasts for up to 11 months, which, in addition to COBRA's 18 months, is enough to last until Medicare.

However, to qualify for this extension of COBRA, you must meet several requirements:

1. You must apply for Social Security Disability Insurance (SSDI) benefits.
2. Social Security must approve your benefits during your initial 18 month COBRA period.
3. The Onset Date of your disability, as determined by Social Security, must be within 60 days of the start of your COBRA coverage.
4. Finally, you must provide a copy of your Social Security Notice of Award letter to your COBRA administrator within 60 days of receiving it AND within the initial 18 month COBRA period.

Now, for a practical look at each of these requirements:

1. COBRA is letting Social Security decide who was disabled when they stopped working with this requirement. If you didn't pay into Social Security because you were a public school teacher or government employee and are therefore not "financially eligible," Social Security is still required to review your medical records to see if you are disabled enough to qualify for SSDI benefits if you were otherwise qualified. When you first apply for Social Security Disability, you need to tell them you are applying in order to extend COBRA.
2. The SSDI claim must be approved during the original 18 months of COBRA. If there is a denial and you have to wait to appeal before an Administrative Law Judge, and it goes beyond 18 months, you lose your chance to extend COBRA even if your claim is later approved.
3. Social Security will determine the onset date of your disability. That is the date they believe you became disabled and the date from which they start counting the five calendar-month waiting period of benefits. Even if the approval letter comes in the last few months of your COBRA Continuation, you can still qualify for the extension if the Onset Date given in your approval letter is within 60 days of the COBRA Qualifying Event.
4. The rule requiring you to give notice has unfortunately cost many people their right to extend their COBRA. The COBRA administrator is usually your old employer but they may have contracted with an outside firm to administer their COBRA'd people. A good rule of thumb is that the copy of the Social Security Notice of Award letter should go to the same place that you pay your COBRA premiums to. Be sure to ask for a receipt or otherwise confirm that the letter was received.

This is a good way to stayed insured since it allows you to stay on your employer's health insurance plan until you become eligible for Medicare.

Drawback --The primary drawback is that during the months after the first 18 months of COBRA, the employer can (and will) charge you the actual premium plus 50%. If you were paying $400 per month on COBRA, the extended months will cost $600 per month.

An Alternative to COBRA in Some States

Many states, including California, have enacted their own mini-COBRA plans, primarily directed at small groups that don't come under the federal law. Many or these laws also extend the length that a person can stay on COBRA beyond the federal 18 months. If the state you live in has such a law, it may be less expensive than the 50% surcharge the federal disability COBRA extension requires. California's Cal-COBRA allows persons to stay on their employer's plan for a total of 36 months.

You must be careful, however, as these mini-COBRA laws are state insurance laws. Large employers don't purchase health insurance, they self-fund their employees' health plan and hire an insurance company or other third-party administrator to process the claims. Because these are not insurance plans, they are not subject to state insurance laws and therefore not subject to state mini-COBRA laws. This is usually true for employers of more than 1,000 employees, and occasionally happens for slightly smaller groups.

HIPAA -- If Your COBRA Ends and You Don't Qualify for the Disability Extension

A 1996 federal law, called HIPAA, provides that people have a one-time opportunity, after losing their employer's coverage, to move to a broad benefit individual health insurance plan.

The rules on qualifying for individual coverage are not complicated:

1. You must continue your COBRA Continuation as long as possible. You cannot drop COBRA at any time and move to the individual plan.
2. You must have been continuously covered under health insurance for at least 18 months. That's easy, since COBRA itself lasts 18 months or longer.
3. The 18 months does not all have to be COBRA coverage, but the last carrier in the 18 months of coverage must end with either employer provided or COBRA coverage.
4. You must sign up for the individual coverage within 63 days of the end of your COBRA insurance.

The Coverage

The plans you will have a guaranteed right to buy will change from state to state. Some states require that everyone purchase coverage from one central plan. Other states require every insurance company writing individual health insurance to carry "HIPAA coverage plans" and each person can go with the company of their choice. Either way, the coverage must be broad, and will almost always include prescription drug coverage. Companies offering "HIPAA" plans must offer their two most popular health plans based on premiums written.

California requires all insurance companies writing individual health insurance in the state to offer two plans to persons ending COBRA. However, when calling a carrier, you need to carefully specify that you are looking for the "HIPAA" plan that "guarantees coverage regardless of health." If not clearly spelled out you will be sent the regular application which includes health questions.

If you don't live in California, to find how your state handles these individual plans, use your browser to search for "HIPAA Options by State," you should be directed to an excellent PDF file from the Disability Rights Legal Center that shows how each state handles HIPAA individual policies.

The Cost

The insurance lobby wasn't totally asleep when this law was passed, so there are no limits on what carriers can charge. It will definitely cost you more than buying coverage on the open market. The cost will also vary dramatically by age and location.

How It Works

Once your COBRA Continuation coverage ends, the insurance company or administrator is required to send you what is called a "Certificate of Creditable Coverage" which is usually simply a letter confirming the starting and stopping dates of your coverage with them. If you work for a company that is small or otherwise doesn't have to offer a COBRA extension, you can still purchase a HIPAA policy if you meet the other requirements, and purchase it within 63 days of your group coverage ending.

Upon presenting that letter to the HIPAA plan or carrier, the plan is required to let you purchase an individual plan without any health questions.

Thanks to these two laws, now, if you ever become insured under an employer health plan, you will be permitted to maintain health insurance indefinitely, even after your employment terminates.

Jacques Chambers, C.L.U., is a Benefits Counselor in private practice with over 35 years experience in health, life and disability insurance and Social Security disability benefits. He can be reached by phone at 323.665.2595, by e-mail at jacques@helpwithbenefits.com, or through his website at www.helpwithbenefits.com.