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Whether you resign from your job, are part of a layoff or have your employment terminated for another reason, chances are that next to losing your paycheck, the loss of your health insurance will cause stress. But thanks to the Consolidated Omnibus Budget Reconciliation Act, or COBRA, you may be able to remain insured under your employer’s group health plan for some time, which can be a lot cheaper than getting your own policy.
Your Employer’s Plan
In order to maintain your health insurance, your employer must be subject to COBRA. Only those employers who offer employees health insurance through a group health plan are subject to COBRA. However, your employer must also have employed at least 20 full-time people for more than half of its business days in the previous calendar year. If your company employs a large number of part-time workers, they count toward meeting the 20-employee threshold, but only count as a fraction of a full-time employee, based on the amount of hours they work, according to the U.S. Department of Labor.
Employment Termination Rules
Most people who lose their jobs can satisfy the second “qualifying event” requirement under COBRA, since the rules only disqualify those who are involuntarily terminated for gross misconduct. The statute doesn’t define what constitutes gross misconduct, but it’s generally accepted that it’s more than just negligent and careless behavior at work; it requires more reckless or intentional behavior that shows an employee’s indifference to the interests of the employer. As a result, voluntarily resigning from your job is a qualifying event that makes you potentially eligible for COBRA. Moreover, in situations where you’re given the opportunity to resign to avoid being fired for behavior that would constitute gross misconduct, your resignation is still treated as a qualifying event, notes DickinsonLaw.com.
Qualified Beneficiary Requirement
The third and final COBRA eligibility criteria requires that you or some other individual, such as a spouse or child, were covered under the group health plan on the day before you resign. In other words, if you didn’t take advantage of the health insurance your employer offered before your resignation, you can’t elect coverage under COBRA afterward, advises U.S. Department of Labor.
Post-Resignation COBRA Considerations
Your employer has 30 days from the day you resign to notify the group health plan of your eligibility to continue your health insurance under COBRA. Once a plan administrator is notified, he has 14 days to send you and other beneficiaries a COBRA election notice that outlines the essential information about the health plan and how to make an election to continue coverage. However, COBRA requires that you be offered the same exact coverage you had prior to resigning for a maximum of 18 months. Keep in mind that you’re responsible for paying all insurance premiums in the future. According to the U.S. Department of Labor, if your employer was subsidizing your health benefits, this means you must now pay the portion the company covered as well as the amounts you contributed through your paycheck, and possibly an additional administrative charge of up to 2 percent of the full cost of coverage.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.