COBRA insurance, also known as continuation coverage, is a temporary health care option for employees of companies who are dealing with layoffs or other significant changes. It provides those individuals with medical benefits that they would typically receive through their employer. The rules for this insurance can be confusing and daunting to navigate on your own. Here are three things you need to know before making any decisions related to it!
How Long Does It Last?
The insurance lasts for up to 18 months after an individual’s employment has ended. If COBRA insurance is needed for more than 18 months, it can be extended. The extension must start on or before October 31 of the year following the termination date and will last up to an additional 36 months after original coverage has ended.
What Will It Not Cover?
It is not designed to cover things like dental or vision, but COBRA does offer a separate plan for that. In addition, they will not pay any income tax on the monthly stipend it provides. This money may be considered taxable by the IRS if your former employer offers it as an employee benefit and you had them withhold taxes from your paycheck.
How Much Does It Cover?
The COBRA plan will pay up to 75% of your income, based on the original coverage level. For example, if you received 100% of your salary before termination, they would cover 75%. If you were making $50k/year and received benefits at 50%, then it would provide a monthly stipend of $375. Additionally, COBRA premiums cannot exceed 102% of the cost that the company paid.
When deciding on COBRA insurance, it is crucial to make sure you know all COBRA insurance rules.