What exactly is COBRA?

I hear a lot of talk on the news about COBRA. What it means to small businesses and the new COBRA act. But I venture to guess that if you are not a business owner, a benefits administrator or someone who has lost their job you have very little idea as to what COBRA is.

COBRA is the “Consolidated Omnibus Budget Reconciliation Act of 1985. Huh? That is a mouth full, hence the acronym is used most often. But what does this Act mean to you?

COBRA is basically a mandated insurance program that allows some employees the opportunity to continue health care coverage after leaving a job. In most cases the coverage lasts for up to 18 months after an employee leaves a job. But with the current economy and the unemployment  rate reaching such high percentages the Obama administration changed things around a bit.

The current administration enacted the American Recovery and Reinvestment Act of 2009. The difference in the rules, keeping this very simple, is that employees now have 65% of their COBRA premium covered by their former employer. This 65% subsidy only lasts for up to 9 months for involuntarily terminated employees.

There are still many changes being made to the COBRA and American Recovery and Reinvestment Acts. Some states are changing the rules to cover more people who may have lost their jobs. Some states are using different rules to report information and how the payments are made out to insurance companies.

There is no short answer to what COBRA is. But if you are in a position where you are administering this for your company or you need it yourself, you sure have to learn fast.