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Advantages to COBRA Beneficiaries

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) outlines specific time frames for employers, plan administrators and qualified beneficiaries to perform certain required acts. With knowledge of these critical time frames, COBRA beneficiaries may gain some financial advantage.

The following information is based on the the COBRA statutes and clarifications issued by the Department of Labor (DOL).

Keep in mind, COBRA laws are subject to revision, and employers or COBRA administrators may not be fully cooperative with COBRA beneficiaries who push the limits of the rules.

60 Days to Elect COBRA Coverage

Each qualified beneficiary has an election period of at least 60 days to elect COBRA. This 60 day period begins from the later of:
  • Date of COBRA Rights Notification
  • Loss of Coverage Date

45 Day Retroactive Premium Payment

COBRA prohibits the employer or COBRA administrator from requiring payment of any COBRA premium before the 45th day from the date COBRA is elected.

However, the employer or COBRA administrator may require the initial COBRA payment include all retroactive premiums. So, if you have waited 60 days to elect COBRA and you have waited another 45 days to make payment (105 total days), a three month COBRA premium payment may be required.

On the other hand, you will have maintained the right to purchase COBRA coverage for at least 105 days -- without having made any payments. The COBRA laws provide an unusual opportunity for consumers to retroactively purchase insurance, depending on whether they need it.

Of course, if you elect COBRA, but do not ultimately pay the COBRA premium, you should be making arrangements for other health insurance.

Also, if you allow more than a 62-day gap between the termination of your group health insurance (including any COBRA continuation) and the beginning of your next health insurance plan, you may not qualify -- per federal law -- for a waiver of the new plan's pre-existing condition exclusion.

30 Day Premium Grace Period

If you elect COBRA and make the necessary premium payment to activate coverage, you will have a minimum 30-day payment grace period for each monthly premium. This is the same payment grace period the insurance company typically gives the employer.

Enhanced Rights for Family Members

Under COBRA each family member who was covered under the group plan is essentially granted the same rights as the employee. This means the employee does not have to personally elect COBRA continuation in order for other family members to receive COBRA benefits. For example, if the employee is in good health, but the spouse is being treated for an ongoing health condition, the employee may obtain less costly individual coverage, while the spouse, alone, elects COBRA.

Another COBRA scenario involves the employee electing medical coverage only, while the spouse elects medical and dental and only dental coverage is elected for a dependent child. Under COBRA, you can "mix and match" the group benefits to your family's situation.

Plan for Permanent Health Insurance

Though COBRA is a wonderful law for protecting consumers during times of transition, it is a temporary fix. We advise all COBRA beneficiaries to carefully evaluate your circumstances. You need to develop a strategy directed toward eventual enrollment in a permanent health insurance program -- either through employer sponsorship plan or purchased on your own.

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