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Quitting a Job and COBRA Eligibility

written by: Bruce Tyson•edited by: Michele McDonough•updated: 7/15/2010

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) was intended to help people who separate from their employers keep their health insurance. Although former employees must pay the entire cost for their coverage, COBRA has helped many families stay insured in between jobs.

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    COBRA Overview

    The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA, was designed to relieve the pressure on workers and families that results when they separate from their employers. Before COBRA, unemployed workers automatically lost their health care coverage, but under COBRA, they have the opportunity to continue it for up to eighteen months as long as they can pay for it.

    In light of COBRA, many people ask, "If I quit my job can I still get COBRA?", an indication that the fear of losing health insurance is a potent force that keeps people in their jobs even when they are not happy in them.

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    COBRA Qualifying Events

    For employees who ask, "If I quit my job can I still get COBRA?" will be glad to know that the answer is "yes." Separation from an employer is just one of several COBRA qualifying events, whether the employee quits or gets fired. Other circumstances can result in COBRA eligibility, such as reduced hours working for the same employer that results in loss of health insurance coverage. in such a case, the employee can continue coverage under COBRA for up to eighteen months.

    Another qualifying COBRA event is when a dependent loses dependent status. Health insurance policies usually define who can be covered as a dependent. If the dependent ceases to qualify as such (whether by age, loss of student status, marriage, etc.), the event triggers COBRA eligibility. This means that the former dependent can continue health insurance coverage for up to three years.

    Divorce or legal separation from a spouse can also cause COBRA to be invoked because it results in a loss of job related insurance coverage. Similarly, if the covered employee dies, COBRA kicks in to allow covered survivors to maintain coverage for up to thirty six months.

    Finally, if a covered employee loses coverage as a result of eligibility for Medicare, the spouse and any dependent children automatically become eligible to continue coverage under COBRA.

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    Other Considerations

    As you can tell, there are more questions about COBRA other than those related to quitting a job. There are a number of qualifying events that allow the employee, the employee's spouse, and the employee's dependents to continue health coverage. There are, however, a couple more circumstances pertaining to COBRA that warrant consideration.

    First, not everyone who quits a job or is terminated actually qualifies for COBRA. If a separation from an employer is based on gross misconduct, COBRA does not apply. This gives employers an effective way to avoid COBRA issues, much in the same way employers claim gross misconduct in effort to deny unemployment insurance claims.

    Another circumstance where COBRA does not apply is in cases where an employer has fewer than 20 employees (including part time workers). In these cases, some state laws might provide alternative solutions.

    Finally, the last consideration is money. Health insurance costs a lot more now than it did in 1985, to the extent that even with employer contribution coverage is almost cost prohibitive. As premium costs continue to skyrocket, COBRA becomes meaningless for a growing number of people who simply cannot afford it.