Rainy Day Plan: In this economic storm, it’s best to know how you can keep your medical insurance if you lose your job

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The holidays may be anxiety-producing for those more worried about being laid off than what presents to buy. With the economic crisis worsening, many San Diegans face losing their job and the subsequent loss of their employer-provided health insurance coverage. At that point, they may have to turn to COBRA or Cal-COBRA.

While not a venomous snake, COBRA can be scary because of its snakelike maze of complex regulations. That’s why it’s important to learn more about these complicated programs.

Here’s a primer.

What are COBRA and Cal-COBRA?

A federal law, COBRA stands for Consolidated Omnibus Budget Reconciliation Act, which is why it’s better known by its acronym. COBRA amends three other U.S. laws in order to continue group health coverage for people who face losing it. COBRA covers private and public-sector group health plans with 20 or more workers. For businesses with two to 19 employees, the state’s program, Cal-COBRA, works in a similar way to protect workers from losing their health insurance.

Why would a person consider applying for these programs?

Other options

For people who are facing unemployment or that possibility, health insurance alternatives aren’t plentiful, but they are out there. If you have decided against or used up COBRA and Cal-COBRA, look at these sites. Some of these options aren’t cheap or particularly easy, so investigate them before the program you’re on runs out.


Type “HIPAA” in the search box at the top of the page on the right side for information about the Health Insurance Portability and Accountability Act.

Type “individual health insurance” in the same search box to see if that’s the best route for you.


This site will provide information about California’s major-or high-risk health insurance pool.


On the left side of the main page of California’s Department of Health Care Services, click on Medi-Cal under “Most Popular Links.” Medi-Cal has several programs that help the uninsured, including children and families.

You’ve probably heard the term “preexisting condition.” Insurers generally determine preexisting conditions – which can range from cancer and drug addiction to STDs and athlete’s foot – and set the time periods covering them (often 10 years). COBRA and Cal-COBRA enable eligible beneficiaries to get the same coverage they had immediately before applying for the program(s) to avoid the risk of being refused coverage because of preexisting conditions.

How much does COBRA cost?

This is the bad news part about COBRA. The employees pay the share that they always have, plus the employers’ contribution. They must then pay 2 percent over that for COBRA or 10 percent for Cal-COBRA. So they go from paying a small percentage to 102 percent or 110 percent of the cost.

“People often say that COBRA is expensive,” says Jean Strouf, registered health underwriter and president of La Mesa-based Teague Financial Insurance Services. “But COBRA is no more than two percent higher than what the employer had been paying. This is the cost of health insurance.”

While that’s true, Jerry Flanagan, health-care policy director for the Santa Monica-based nonprofit Consumer Watchdog, notes that many people are shocked by the price tag.

“That’s the big problem with COBRA,” says Flanagan. “And that’s why we need health reform so badly. COBRA is good, in that it helps people from being uninsured. But it is so expensive many people can’t afford it. “

Who does COBRA cover?

COBRA expert Strouf explains that it designates two categories of qualified beneficiaries. One includes people who have lost coverage due to layoffs, retirement, reduction of hours or termination (for reasons other than gross misconduct).

The other category includes people who have been covered by their spouses’policies, which are ending because of death, divorce or transition to Medicare. It also includes young people who are no longer considered dependents by their parents’ or guardians’ insurance policies. The age limit varies from 19 to 24 and some companies require full-time student status. Strouf points out that sometimes the employer helps determine how long health insurance lasts for children.

How do people find out if they qualify for COBRA?

The responsibility of notification falls to the employer (of 20 or more employees). Employers must notify employees of their right to COBRA at two times: Once within 30 days of being first enrolled in the group health plan; and when the employee becomes eligible for COBRA because of what is called a “qualifying event,” which has resulted in a loss of coverage. At that time, the employers inform the employees of their premium cost.

How long does coverage last?

COBRA coverage continues employer-sponsored health coverage for 18 months in most situations. Spouses and dependent children of workers who have died or been divorced or legally separated can be covered for 36 months. After 18 months, COBRA beneficiaries may be eligible for 18 more months under Cal-COBRA, the state program. Strouf says that the employer is required to notify within thirty days that coverage through COBRA is being terminated and that Cal-COBRA is available.

Workers in companies of 2-19 employees are covered under Cal-COBRA, which usually lasts 36 months.

Is there a grace period for COBRA and Cal-COBRA payments?

COBRA allows 45-days for the initial premium to be paid. Regular COBRA and Cal-COBRA payments must be paid within 30 days. Some insurance companies, however, will cancel coverage for a payment that is only a few days late, but must reinstate if it’s within the 30-day period.

“Many insurance firms don’t like COBRA folks and some companies have been involved in varying levels of fraud,” says Flanagan. “Bottom line allows a 45-day grace period for the first payment. These kinds of issues are usually quickly resolved if you challenge them.”

If COBRA and Cal-COBRA are so expensive and complicated, why do we need them?

Californians must rely on COBRA and Cal-COBRA because there is no state law requiring guarantee issue, which means you can get insurance no matter your health problems.

“In 17 states, insurance companies can’t refuse applications because of preexisting conditions,” says Consumer Watchdog’s Flanagan. “The laws vary from state to state; some, for example, ban extra charges for preexisting conditions.”

“This is one of the national reforms we have been calling for,” he says, “and the Obama administration seems positive about it.”

Beth Wood is a San Diego writer.

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
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