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COBRA – Continuation Health Coverage

Are You Covered?

Congress passed the Consolidated Omnibus Budget Reconciliation Act that has health benefit provisions since 1986. This law amends Employee Retirement Income Security Act, Public Health Service Act and Internal Revenue Code. The goal of COBRA is to continue health coverage for groups that must be terminated otherwise.

COBRA has provisions giving former retirees, employees, dependent children and former spouses the right for temporary continuation of coverage on health insurance plans in terms of group rates. However, the coverage can only be made available when this is lost because of specific needs. The Group health plan coverage for participants in COBRA is more expensive than the health coverage of employees who are currently active. Usually, it is the employer that pays the portion of the premium for the employees who are currently working while the COBRA participants pay the full premium themselves. Surprisingly, it is less expensive than the usual health policies.

Employers who have 20 or more individuals in their company are required to provide COBRA coverage for them. It is also their responsibility to notify the employees that this coverage is available. COBRA also applies to the health plans that have been maintained by the employers in the private sector as well as those that are sponsored by local governments and most state.

Who are entitled to COBRA benefits?

There are three qualifications for COBRA benefits. In fact, COBRA has already established specific and clear data for the policy plans, qualifying events and qualified beneficiaries.

Plan Coverage: Employers who have 20 employees under their wing for more than half of the typical business days in the year before are required to be under COBRA. Both the part time and full-time employees are included in the tally of determining whether the health plan is more suitable for COBRA> Every part-time employee is a fraction of the other employee, therefore what one gets is equal to what the others guest, if they share the same number of rendered hours. The calculation is the hours that part time employee rendered divided by hours that the employee will work if he will be rendering full time hours in the future.

Qualified Beneficiaries: To be considered as a qualified beneficiary, the individual must be covered by a health plan for groups on the very day before an even that is considered to be qualifying by either the employee, the spouse of the employee or the dependent child of the employee. There are cases wherein the retired employee or the spouse of retired employee and dependent children of retired employee are also qualified beneficiaries. Aside from this, a child that was born or placed through adoption with an employee who is covered during COBRA coverage is also regarded as a beneficiary that is qualified. Independent contractors, agents and directors who are part of the health care for groups can also be eligible beneficiaries.

Qualifying Events: As mentioned earlier, these are events that cause the employee to lose or discontinue his health coverage plan This kind of qualifying event can also determine who among them will be qualified beneficiaries as well as the time duration that the plan will be offered to cover them through COBRA. The plan, using its discretion, can also provide a longer period of coverage that will continue for a long time.

These are qualifying events specifically for employees:

  • Voluntary termination as well as involuntary termination of the individual’s employment due to reasons aside from gross misconduct.
  • Reducing the total hours of the individual’s employment.

These are qualifying events specifically for the spouses of the employees:

  • Voluntary termination as well as involuntary termination of the individual’s employment due to reasons aside from gross misconduct
  • Reducing the total hours that are worked by the employee who is covered by the plan
  • The individual who is covered by COBRA is entitled to get Medicare
  • The legal separation or divorce of the individual who is covered
  • The death of the individual who is covered

Qualifying events for the dependent children of the individuals who are covered are similar to that of the spouse but has this addition:

  • Losing the status of being a dependent child as listed in the rules of the specific plan.

 What are the Benefits Covered Under Cobra?

 The qualified individuals and beneficiaries must also receive a coverage that is similar and available to those who are situated in the same beneficiary as those not receiving the coverage of COBRA. In general, this is the similar coverage that an eligible beneficiary has as immediately as possible before he or she has qualified for a coverage that continues. If there is a change in benefits due to the specifics of the plan for an employee who is currently working, this will still apply to the beneficiaries who qualify. Qualified beneficiaries can also make similar choices that are offered to the individuals who are not under COBRA, like periods of enrollment in the plan in an open setting.

Who is charged for the COBRA coverage?

The beneficiaries are required to pay for the coverage under COBRA. This premium may not go beyond the 102% of the total cost of the plan especially for individuals who are similarly situated but have no incurred the qualifying events as specified. This also includes the portion that is covered by the employees as well as the portion that the employer has already paid for even before the event that qualifies, atop the 2% rendered to cover the administrative costs.

For beneficiaries who qualify, they receive the 11-month disability that is the extended duration of the coverage. This is also the premium targeted for the additional months that can also increase to as much as 150% for the total cost and coverage of the health plan.

COBRA premiums can also increase if there are costs to the said plan that also increases but these can also be fixed when set in advance for every premium cycle of 12 months. The plan can also let the qualified beneficiaries pay the premiums indicated on monthly basis if they requested for this. The plan can also let them make the payments in other intervals, the choices are weekly basis and quarterly basis.

The initial payment of the premium can also be made during the 45 days after the COBRA election date of the qualified beneficiary. The payment can also cover the coverage period after the COBRA election date that is retroactive to the loss of coverage date because of the event that is considered to be qualifying. The premiums for successive coverage periods are due and set on the date that is stated and mentioned in the plan coverage with 30-day minimum for grace period payments. Payment is also considered to be made accordingly on the specific date that is directly sent to the plan coverage.

If the premiums have not been paid on the first day of the coverage period, then the plan can opt to cancel the coverage until the payment for this has been received and immediately reinstate the coverage as retroactive to the start of the coverage period.

If the amount of payment that was made to the coverage was conducted in error but not significantly lower than the amount due, then the plan requires to be notified by the beneficiary that is qualified and report it as a deficiency. The individual will then be granted a period that is reasonable, which is usually 30 days, to pay for the difference. The plan coverage is also not required to send the individual monthly notices of the premium.

The COBRA beneficiaries stay as subject to the rules especially to the plan and must also satisfy the costs that are related to deductibles and co-payments. These are also subject to benefit limits.

The Federal Government and COBRA

The continuing coverage of COBRA as administered by the several agencies like Department of Treasury and Department of Labor have jurisdiction especially on the private-sector and health group plans. Meanwhile, Department of Health and Human Services also administers the coverage as it continues because it has an effect on the plans for the health of the public sector.

The regulatory and interpretative responsibility of the Labor Department can be limited to the notification requirements and disclosure of COBRA. If further information is needed about ERISA in general, then the individual can just write to the office of EBSA that is nearest to him or her. It is also possible to consult the US Department of Labor as well as the US Government for the listing in the phone directory of the office near them. EBSA is Employee Benefits Security Administration under US Department of Labor.

The Department of Treasury as well as the IRS has also issued regulations on the provisions of COBRA that is related to the coverage, eligibility and premiums. Both the Department of Treasury and the Department of Labor share the jurisdiction for enforcing the said provisions.

COBRA coverage and the Marketplace

When the individual loses the insurance that is received from his job, then he is also offered the continuation coverage of COBRA by his or her former employer, if the latter opts to do so.

If the individual chooses not to take the coverage of COBRA any longer, then he or she can just enroll in the Marketplace plan. Losing the coverage from the job-based health premium lets the individual qualify for the Special Enrollment Period. This is a period of 60 days that allows the individual to enroll the health plan and this can be done even if it is outside the Open Enrollment Period.

Is it possible to change from COBRA to a Marketplace Plan?

If the individual’s COBRA is running out, he or she can still change during Open Enrollment. It is also possible to change outside Open Enrollment as long as the individual qualifies for the Special Enrollment Period.

If the individual is ending his or her COBRA coverage earlier than expected, he or she can still change to the Marketplace plan during Open Enrollment. It is however a different case outside Open Enrollment. The individual can no longer change from Cobra to Marketplace in this scenario. He or she has to wait for the COBRA to run out and for him or her to qualify for the Special Enrollment Period in one way or another.

If the COBRA costs have changed because the individual’s former employer have also stopped contributing and is required to pay the full cost of the coverage, the individual can still change to the Marketplace Plan during Open Enrollment. It is the same during outside Open Enrollment. He or she can still change especially when he qualifies for the Special Enrollment Period.

More information on COBRA

COBRA also qualifies as the health coverage or what is also regarded as the minimum essential coverage. That being said, if the individual has the COBRA coverage, then he or she does not have to pay the complete fee that other people who are not covered by COBRA are required to pay.

If the individual has already signed for COBRA coverage but then eventually finds the premium and payments to be too expensive, his or her options depend entirely on whether it is the Open Enrollment Period. He or she can change to the Marketplace but that can cost him or her more than usual because he or she has to opt out of the coverage.

As for people who are wondering if it is possible to switch to Medicaid from their COBRA coverage but outside the period of Open Enrollment, it is important to note that it is also possible to apply for as well as enroll to be covered by Medicaid at any time. The process is to drop the COBRA coverage earlier than expected and to check if the individual qualifies for both Medicaid and CHIP. This is done by people who leave the employers and those who find the COBRA coverage more expensive than expected.

Health Insurance Deduction

Tax deduction is a big concern, and on the other hand it is highly beneficial because it can help you in various ways. Health insurance is one of the most crucial things that you can consider in your life. And although you may compromise on many things in life, health insurance is surely something where you don’t want to take a chance. This becomes more important when you know that tax deduction can considerably help you pay for the health insurance.

The Internal Revenue Service or IRS provides various kinds of deductions for medical expenditures. There are some itemized reductions. Thus, you can make claims for standard deductions. Again some medical deductions are over-the-line exemptions and so all these can be claimed in addition to the standard deductions. With regard to healthcare tax deductions, three options as mentioned below can be chosen.

      •  In case you find that your expenditure crosses 7.5 percent of the adjusted gross earning, then you could take an itemized reduction where your expenses surpasses the brink. By qualifying medical expenses, you could consider medical, vision or dental care for your own self, your spouse or any individual dependant on you. Medical services include the ones that would prevent problems that could arise in the future, solve present problems or reduce pains. Medical drugs which need a prescription can be deductible. Further, expenses that you may incur in due course of traveling to the hospital in the form of parking fees, mileage, tolls can also be included.
      • In order to save for future medical expenditure, health savings accounts are sheltered by tax. However, in order to be eligible for this, you also need to possess a healthy insurance plan which has a high deductible. Every year, your contribution can go up to a limit set on the basis of the fact as to whether the health insurance plan is just meant for you or also includes your family.
      • Health insurance deduction can also be seen when you are self-employed. If you are in a partnership or you are the owner of greater than 2% of a corporation, you would be able to deduct the price of your health insurance policy and also that of your spouse and any other individual dependant on you. But if you have to qualify for the deductions, your policy should be in your name, that is, the name of the self-employed person, business or partnership. In this deduction, qualified long-term care premiums can be included. But again, there is a limit to the deductible amount because the age of the insured plays an important role in this. This deduction would affect your income tax. But as far as the decrease of your tax liability is concerned, this deduction would not be of any help. As a self-employed individual, you could deduct health insurance premiums from federal income taxes. As a taxpayer, you would be offered huge exemptions that could bring down the taxable income and thus lower the total amount that you would pay in federal income tax.

In order to understand more about tax deduction and the way it helps health insurance, you should have the clear idea about the following.

If there is a group health insurance provided through an employer then the tax exemption can be enjoyed. In such a scenario, probably your employer is paying the premiums of your insurance from your gross income before holding back federal tax income. This way your yearly tax income comes down and thus you will have a reduced tax bracket. In case your employer is not offering health insurance, you should ideally buy an individual health insurance policy from a private insurance organization. This might also be the case if you prefer to have a completely different coverage plan other than what is available. But again in order to avail tax deductions on health insurance in this regard, you need to note that you will only be able to deduct your private health insurance premiums on your federal income taxes if they are greater than 7.5 percent of your adjusted gross earnings

Tax deduction can also be seen in long term health care. The number of adults who need long term health care is on sharp rise. With the constant increase of health care expenditure, it seems that every single year, insurance coverage is getting lesser with respect to the total expenses for health care. Here, if you can comply with certain qualifications, then you can deduct cost of long term health care on the returns of your income tax. There are certain long term medical care expenses which are deductible. These include the costs incurred for diagnosis, medical treatment, healing and preventing an ailment. Certain drugs which need prescription are also deductible. With respect to long term medical care, the expenses include the cost incurred on nurses or certain care facility on long term basis, provided these have been prescribed specifically by a doctor. Health insurance payments can be deducted by you in the total expense; but again you would not be allowed to take health insurance deduction pertaining to life and disability.

While availing the benefits that tax deductions can do to health insurance, you need to make a note that all deductions should be the expenses paid during the year of tax filing from January 1 to December 31. In case you are mailing a payment on the last day of a year, that is 31st of December then it will surely be considered to be the expenditure for that particular calendar year.

Obama Care Explained in Plain English

The US President, Barack Obama and the Congresss, signed an agreement in the year 2010 to bring Obamacare into practice. This is a health insurance scheme initiated by the President, so that all the US citizens are covered. The medical costs are on an uptrend in the recent years and average medical expenses run into thousands of dollars. In a bid to reduce these costs and make the citizens feel covered in case of medical emergencies, the Obamacare plan was launched.

Once a family is covered with the general health insurance, then it need not worry about the shooting medical expenses in case of hospital visits, as a majority of the expenses are covered under this scheme. The patient only needs to pay a very nominal amount during the first visit to the hospital. This is called co-payment. Most of the employees provide this scheme to their employees in return for a reasonable monthly premium payment.

However Obamacare gives additional benefits to families who already have this scheme and it also provides coverage for people who are so poor that they cannot afford even the minimum premium payments. There are lots of daily wage workers in the US, whose employers do not offer any health insurance schemes to cover them. Obamacare is a panacea for all.

Changes that are reflected already

People who have health insurance get additional benefits from Obamacare in various ways. Parents can get additional coverage for their kids, till the kids turn 26 years of age. This plan does not drop patients midway or remove the coverage if somebody in the family falls ill suddenly. Insurance companies, under Obamacare policy, can never refuse to cover for families that have a chronically sick member. The co-payment option is taken off from this system and most of the general check and pregnancy tests can be done free of cost.

Insurance companies cannot act fraudulently and can raise premiums during the term of the policy, only if the increase rates are allowed by the state government. According to this policy, the insurance companies should use 80% of the premiums they receive, for settling claims of the insured people. However, if they fail to do it and instead spend on advertising expenses, they have to send a check to the insured for the excess amount used up. Families that do not have any insurance can use Obamacare to get temporary insurance cover till the year 2014.

Important changes in future

Obamacare will make health insurance compulsory in the year 2013. Failure to take insurance  will attract a fine of 2.5% of the annual income to be paid to the government. Insurance schemes can be easily purchased online. Small business employers will have to mandatorily buy health insurance, failing which, they have to cough up a fine of $2000 per employee, except for the first set of 30 employees who joined the company.

Tax Breaks for Health Insurance

Health insurance is one of the largest costs that most people deal with on a monthly basis other than mortgage. Health insurance for those who are self-employed is normally higher than those who have employer offset health insurance. Luckily, there is a tax break for those who are experiencing large health insurance payments.

To qualify for the IRS health care tax deductions for you and your family you must be either a self-employed individual with a net profit, have a self-employed partner who qualifies, or be shareholder with more than a 2 percent stock in an S corporation.

The insurance plan must be established under your name or the name of your qualifying partner. For the self-employed, this can be your personal name as long as this is the name the business is run under. The self-employed individual or the stockholders must be the one who is paying the health insurance premium for this credit to apply.

Stockholders must have the health insurance plan in their name or be reimbursed by the business for health costs to be eligible. This must be verifiable via W-2. To qualify for the tax credit, you must use the Schedule C or 1040 form to apply for the credit.

This tax credit can be a large offset for those who are self-employed, as health insurance costs can equal up to a large amount of self-employed income each year. Self-employed persons also pay a higher tax rate than those with an employer so this credit can decrease the tax amount in an effective manner.