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Can you guess the two most common COBRA questions?

As a COBRA third party administrator, two of the most common questions we hear are “What is COBRA” and “Why is it so expensive?” So today, we are going to tackle these questions from a 30,000 foot perspective:

1.What is COBRA?

  • It is an acronym and stands for Consolidated Omnibus Budget Reconciliation Act
  • A set of rules established by the Federal Government
  • Is healthcare coverage (dental, medical, vision, etc.) sponsored by an employer.
  • Is available to people who have lost access to healthcare coverage due to specific scenario like job loss or divorce.
  • Allows people to maintain their existing healthcare coverage in a “pay-your-own-way” scenario for 18-36 months.

2. Why is COBRA so expensive?

  • The quick answer is healthcare insurance is expensive (especially when you are paying the entire premium).
  • Typically, employees only pay a portion of their insurance premium via payroll deductions. Their employer is covering the rest of the premium balance due.
  • For example, let’s say insurance coverage costs $1300 per month. The employee is paying $300/month via payroll deductions and the employer is paying $1000/month.
  • If the employee wants to pick up COBRA coverage, they have to pay the full $1300 bill.

Keep in mind that COBRA has a lot of complicated rules (and penalties for non-compliance) that can complicate even the most basic questions. And we’re here to help.  If you are an employer looking to avoid compliance penalties and want to rely on the experts to keep your plan in compliance, give BusinessPlans a call today at 800.865.4485.


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