COBRA Basics

By request, I am discussing COBRA today. It is a more popular topic than ever because our unemployment rate is hovering above 9%. Many people think COBRA is a special kind of health coverage. It isn't! It is the same plan you were covered by while you were working.

As a newly hired employee at most companies (or state and local governments), you may be offered the ability to get medical coverage through the company. The cost of the coverage is relatively low compared to the price you would pay if you bought the coverage yourself.

One of the many reasons that the coverage is cheaper is because the employer pays a large portion of the cost for you. Employees usually only pay between 20% and 30% of the cost of the insurance while their employer pays the rest.

When you leave the company, your medical insurance ends. This is probably the worst time for you to have to pay for health insurance and many people go without it while they are out of work or in between jobs.

In 1986, Congress passed the COBRA law (Consolidated Omnibus Budget Reconciliation Act). The law required employers to temporarily extend the health care coverage they offer to their active employees to those leaving their medical plans. This could be those who leave the company for another job, get laid off, spouses who are now divorced, children who are now too old to be covered under their parent's plan, etc.Depending on the reason you losing your coverage, you could be eligible to have COBRA for18 - 36 months.

About two weeks after your coverage ends, you will get a packet in the mail explaining how you can enroll in COBRA coverage. Once you complete the paperwork and pay, your COBRA coverage begins. The effective date is the day after your active coverage ends so there is no gap.

It all sounds great so far. You get to keep the coverage you had when you were working, right? Not so fast... the biggest problem with COBRA is that since you are no longer working, you don't get the "benefit" of your employer paying 70% or 80% of the cost of your health coverage. Now you are paying the full cost on your own (plus a 2% administrative fee).

So while COBRA sounds good, many people opt to skip it. Recently, as part of a large stimulus package to help the economy, Congress passed a law (ARRA) that requires employers to pay 65% of the COBRA costs for their recently laid off workers. The government repays the employer so it is really the government paying the 65%. The government gets this money from Americans who pay taxes.

The idea is that the amount a laid off worker would pay is about the same as they would pay if they had been working. The 65% COBRA subsidy is close to the 70% or so that the employer paid as a "benefit" to active workers.

There are rules about who is eligible and how long you can get the subsidy (up to 9 months) so click here to read more. Hurry, the COBRA subsidy ends soon!

An Ounce of Prevention Is Worth a Pound of Cure

In the old days, doctors wanted you to come to their office for a full physical once a year. These physicals were never covered by health insurance because the person wasn't actually "sick". So people paid full price for the visit.

Now, doctors and health insurers have learned physicals are not necessary for everyone every year. Generally the older you are the more likely you are to need one. Many health insurers now cover preventive care at 100% (free to the patient). They do this because it is cheaper to pay for a physical where an illness might be detected and treated in its early stages. If you try to treat an illness when it as advanced, more technology, tests and treatments are needed so the cost goes up and up.

A great example of this is heart disease. During a routine physical, your doctor will take your blood pressure. The doctor will likely recommend changing your diet and increasing exercise as a way to lower your blood pressure. But, if you need blood pressure lowering medicine, the doctor might give you a prescription to take. The cost you pay for the medicine each month is far cheaper than ignoring the high blood pressure until years later when you have a heart attack or stroke. The cost of treating you in the cardiac (heart) intensive care unit and later in cardiac rehabilitation is far greater than the copays for that blood pressure medicine. (Diet and exercise is even cheaper... FREE!)

So check your coverage to see if preventive care screenings (preventive physicals, well baby visits, mammography, pap smear, flu shot, prostate tests, etc,) are covered for your and your family. Then make sure each of you is taking full advantage of this benefit by having whatever preventive screenings the doctor recommends for you (based on your age and gender).If you don't take advantage of the preventive care now, you could cost yourself money and health later on.

Hey, doc! I have this pain...

Knowing someone in "the business" is always helpful regardless of what business that is. When your car breaks down, having a cousin who is an auto mechanic can be very helpful. Even if he doesn't actually work on your car, you can ask him questions at the Thanksgiving table about your carburetor and he is likely to at least point you in the right direction.

I have several friends who are doctors who share stories about how their friends and family come to them for medical advice. It doesn't matter that cousin Larry is a dentist. They still ask him questions about their bunions at the family reunion.

As a Benefits professional, I experience the same phenomenon. Two or three times a year, I receive a flurry of emails and phone calls from friends and relatives asking me to help them choose their medical plan or wondering whether it is worth it to carry Life Insurance.These are the typical questions that Benefits professionals receive from employees during the annual Open Enrollment period.

At first I thought that they were asking for my help because I was family and not likely to give them incorrect information. But after a while I realized that it is because I have learned how to translate "Benefit-ese" into simple, plain English. Those giant packets that get mailed to your home once a year from your Human Resources Department are intended to give you all the information you need to make good choices for your family. The truth is, (and it hurts me to say this) few employees actually read these packets at all.

They don't realize that their HR/Benefits Department puts months and months of hard work into choosing the Benefit plans to offer each year. Balancing cost with coverage and always faced with giant cost increases that far outweigh any raises received each year. They don't realize that their benefits Team is there to serve the employee and provide assistance when needed. They never take advantage of the health care experience the Benefits Team can offer. In fact,many people don't get their health care through their employer at all so they don't have the option of calling their Benefits or HR Department to ask a question.

I wanted to help people navigate the treacherous waters of choosing the right coverage for their family. A simple mistake during Open Enrollment could cost you thousands of dollars. I wanted to offer you the opportunity to take advantage of a personal Benefits Guide who help you choose the best path, spend the least amount of money and get the greatest use out of your health care coverage.

You may not have had a friend in the "Benefits" business who can explain it all in easy to understand terms... until now!