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Medical Insurance: Who Determines the Cost: COBRA (Consolidated Omnibus Budget Reconciliation Act)

This is a fancy term for guaranteed access to insurance coverage when you leave a company or your family situation changes. (Guaranteed coverage does not mean FREE.)

The federal government has guaranteed continuous coverage if you quit your job, if you are fired from your job, if you divorce, or for your child, should your child reaches a certain age and chooses not to go to school.

This guarantee is for a period of up to 18 months, to allow you time to purchase coverage through other sources, most likely through re-employment.

Your employer (or previous employer) may contract with a COBRA administrator to manage policies for terminated employees or ex-dependents.

The COBRA administrator will collect your monthly payments, and send the same type of eligibility files to your insurance administrator that the employer is sending.

The reason COBRA exists is because eligibility for coverage through a new insurance plan may include a passing physical exam and/or disclosure of Pre-Existing Conditions. Individuals may have been denied coverage if it appeared their medical costs were high.

This historically created problems for many individuals who lost medical coverage for various different reasons, and were unable to obtain coverage because it would be costly for the insurance plan to pay for the medical care these individuals would need.

Remember, previously we discussed the pool of money to cover medical needs? Insurance administrators collect data to determine how much needs to be in this pool of money, data about the cost of annual care for different situations.

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