3433-vol. 6 issue 2-3.pmd - iarfc

36
Journal of Personal Finance
and COBRA end), nor do they reduce the cost of health insurance premiums
or require employers to provide health benefits to their employees (U.S.
Department of Labor, 2001).
COBRA provides continued group health insurance, at premiums of
up to 102% of cost, for up to 18 months (terminated workers) or 36 months
(dependents of covered workers who lose coverage through life events such
as widowhood or divorce). Coverage is voluntary within a specified time limit
if elected by employees of companies with 20 or more workers and a group
health insurance plan. COBRA covers departing workers who lose their
health insurance coverage due to voluntary or involuntary termination (except
in cases of gross misconduct), reduced work hours, or retirement. COBRA
also covers widows and divorced spouses who become ineligible for health
insurance coverage through the end of a prior marital relationship with a
covered worker and adult children of covered workers who lose “dependent
child” status under health plan rules.
Eligible COBRA participants (terminated employees and dependents)
have a right to the same coverage as active workers (e.g., vision care and
dental benefits, if available). Employers must provide written notification
about the right to elect continuation coverage under COBRA to eligible
workers and dependents. Qualified individuals who elect COBRA benefits are
required to pay up to 102% of the cost of the group health plan based on a
premium schedule set by the employer (e.g., quarterly payments).
HIPAA provides workers and eligible family members with preexisting
conditions guaranteed immediate coverage under a new employer’s
health insurance plan if they were insured for at least 12 months with a former
employer. The intent of HIPAA is to reduce “job lock” by lessening the risk of
loss of health coverage associated with a change of employers. Eligible
workers who change jobs aren’t subject to a waiting period (often a year) for
medical expenses associated with pre-existing conditions unless they have a
lapse in insurance coverage of more than 63 days. Those covered by HIPPA
include workers who change employers and switch from one company health
plan to another and those who leave a company with health benefits to launch
a small business/consulting firm with an individual policy, but only if they
were covered by a group plan for at least 18 months and have exhausted all
available COBRA benefits for an additional 18 months, if eligible. The maximum
waiting period for workers who don’t have 12 months of continuous
prior health plan coverage is 12 months or 18 months for late enrollees who
join a plan after the earliest date that coverage becomes effective (U.S.
Department of Labor, 2001).
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