When to take the Cal Cobra Extension
Unfortunately, there's been a lot of questions we have fielded on California Cobra over the past 5 years due to the economy. For a quick recap, Cobra in continuation of group health insurance loses group health insurance either voluntarily or due to termination. The good news is that people with health issues who might not qualify for coverage on the individual and family market have a continuation option which is guaranteed issue. This option is generally not a cheap one and provides a real eye opener on the true cost of their health benefits provided by the prior company. California never leaves anything alone and this is true for Cobra which is a Federal program. Their answer is Cal-Cobra and many people are not aware of this option. Let's take a look at Cal-Cobra and whether it might a good option for you.
Another 18 months of Cobra coverage
Cobra typically runs for 18 months for most cases although some people might get 36 months due to special circumstances. When your Cobra exhausts, you may be eligible for another 18 month period of the same coverage through a Cal-Cobra extension. If the company is eligible (generally requires being domiciled in California), employees can elect a Cal-Cobra extension when they run out of the original 18 months. Just like Cobra, Cal-Cobra requires that the underlying group health plan continues in force. If the company cancels the plan all together (not just a change to another carrier) or goes out of business, the Cobra and Cal-cobra coverage will go away as well. In this case, a person may be eligible for HIPAA coverage which is guaranteed issue. How do you find out if you are eligible for a Cal-Cobra extension.
Checking if Cal-Cobra is available to you
The best approach is to ask your health insurance carrier or HR department. If the person doesn't sound to familiar with the question, don't take their answer at face value since many people are still new to the term even though it's been around for years. We have heard from many clients that they had to inquire a few times before getting a solid (and correct) answer. Make sure to use the term "Cal Cobra Extension" so there is no confusion over what you're asking about. When does it make sense to take a Cal-Cobra extension?
Cal-Cobra is Guaranteed issue, the same benefit that Cobra affords
This is the deal. Cobra and therefore Cal-Cobra which is the same coverage at generally the same price (might include 10% increase due to administration costs) are usually used by people who are unable to qualify for the individual and family market plans based on health. Currently (and this will change with health reform Jan 1st), individual and family plans are about 1/2 the cost for comparable coverage versus group health plans but they are also medically underwritten which means you need to be in good health to qualify. If a person can qualify based on health, they will usually take individual family coverage and save the money. If not, they will elect Cobra (and Cal-Cobra) at the higher cost but with no medical underwriting. You can run your individual family quote here if you feel you can qualify based on health. Otherwise, check into Cobra and Cal-Cobra rates and eligibility. How will Health Reform affect Cobra and Cal-Cobra?
Health reform will make many current options obsolete
It's hard to see how Cobra and Cal-Cobra will be needed when the Health Reform changes hit the market in earnest in 2014. All plans on the individual family market will be guaranteed issue (regardless of health) and the rates on the individual market will likely rise to where group coverage is. Cobra was intended as a safety net for people losing group health. This net will largely not be needed going forward. It will still exist but the need for it might not.
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