Kids and Health Care: COBRAs, Cafeterias, MSAs & Other Job-Related Issues Introduction

The most common issue for family health care in America is what happens when the family's main earner changes jobs. Because most Americans get their health coverage through their breadwinner's work, changing jobs can be as much about benefits as career-track, money, location or other considerations.

If you have kids, you know how important these benefits are.

The main U.S. law related to job changes and health care is the Consolidated Omnibus Budget Reconciliation Act of 1985 -- commonly known as COBRA -- which provides health coverage for qualified people, their spouses and dependent children when people are between jobs. Under COBRA, if you voluntarily resign from a job or are terminated for any reason other than gross misconduct, you're guaranteed the right to continue in your former employer's group plan for individual or family health insurance for up to 18 months, at your own expense.

And, in some cases, non-working spouses and dependent children can buy COBRA coverage for longer periods...sometimes as long as three years.

Your spouse or any of your children may enroll in COBRA independent of your COBRA decision. So, even if you don't use COBRA coverage, your family members may elect to continue their health insurance benefits under your former employer's plan. Newborn and newly adopted children of people who have COBRA coverage automatically qualify for the coverage, as long as you enroll them within 30 days of the adoption or birth.

Another point: You don't have to stay on COBRA the whole time -- nor will you always be able to -- if different health insurance becomes available to you.

Your former employer will not keep paying for your health insurance. You'll have to start picking up the tab. The company can charge you 102 percent of what the coverage under the group plan actually costs (the extra 2 percent is to cover administrative costs). But you can be pretty sure that this amount is substantially less than what you'd pay if you bought your own individual family coverage.

By law, your employer is required to let you know about COBRA and what steps you must take to retain your health insurance coverage.

A caveat: Not every employer has to offer COBRA benefits. The law grants exemptions to the federal government, certain church-related organizations and firms employing fewer than 20 people. But, even if you worked at a small company that's exempt from the federal law, you might still be able to keep some coverage for your kids. Many states have adopted their own laws, sometimes known as "mini-COBRAs" that grant broader rights in determining eligibility for coverage.

The coverage you receive under COBRA must be identical to the coverage you had before. But, if your former employer changes its health insurance plan for current employees, you may receive benefits under the new plan, even though the benefits may change. In other words, if your former employer switches plans, you cannot keep the old plan.

If your former employer offers an open enrollment period to active employees and you're on COBRA, you must also be given the option to switch plans during that time. You may also add new dependents (a newborn, newly adopted child or new spouse) if your employer offers this option.

Your former employer can -- but isn't required to -- give you the option of dropping such "noncore" benefits as dental and vision care. Since you'll be footing the bill each month for the coverage, dropping these coverages sometimes makes sense.

COBRA coverage ends when:

• you reach the last day of maximum coverage;
• you don't pay the COBRA premiums on a timely basis (usually within 30 days of each month's due date);
• the employer ceases to maintain its group plan for current employees;
• the employer goes out of business;
• you get coverage through another employer plan that doesn't contain any exclusion or limitation with respect to pre-existing conditions;
• you relocate out of your COBRA health plan's coverage area (your former employer is not required to offer you a plan in your new area); or
• a beneficiary is entitled to Medicare benefits (in this case, family members can stay on the COBRA coverage).

Although COBRA sets specific time limits on coverage, there is nothing stopping the health plan from extending your benefits beyond the mandated coverage period. So, it's usually a good idea to ask whether your former employer is willing to extend COBRA coverage longer than the 18- to 36-month terms required by law.