I hate snakes. Everything about them scares me. The way they look, the way they move, the shape of their head, those fangs and the way they swallow their dinner whole. Is there anything on the planet more scary? I am extremely happy that when we talk about COBRA we aren’t talking about snakes but instead, The Consolidated Omnibus Budget Reconciliation Act of 1985.
With unemployment on the rise due to the recession, we are hearing more about COBRA. Of course we hear a lot about it but very few are talking about what it actually does. According to Washington, “COBRA requires most employers with group health plans to offer employees the opportunity to continue temporarily their group health care coverage under their employer’s plan if their coverage otherwise would cease due to termination, layoff, or other change in employment status.”
To break it down to terms we can understand, if you lose your job for a qualifying reason, employees are required to allow you and your dependants to continue health coverage for 18 months after job termination or 29 months if the employee is deemed disabled during their first 60 days under the COBRA program. This should give anybody who feels they are at risk of losing their job a good feeling knowing that their family won’t lose health insurance coverage.
There is a drawback that may make you rethink your 6-10 month emergency fund calculations: First, although you and your family are entitled to continue on your company’s health plan, you former employer is not going to pay for it. You are going to foot the bill for 100% of the cost. How do you figure out the cost? Take a look at your pay stub and see if it states how much your employer is contributing per check. Multiply that amount by 2 (if you are paid by-weekly) and look at your share and multiply that by 2 and then add them together. That is what you would need for health care costs per month if you were to lose your job.
If you want more information, go to one of these two sites:
United States Department of Labor