and Accountability Act
If you're like many other Americans, you count on your
employer for health insurance coverage. But what will happen to your health
insurance if you stop working or no longer qualify for benefits? Your company
might begin downsizing and lay you off. You could suffer a serious injury and
become disabled. Your spouse could suddenly pass away, or your marriage could
end in divorce. These events can occur when you least expect them, leaving you
without health benefits if you can't get, or can't afford, private individual
Fortunately, there's COBRA.
A provision of the Consolidated Omnibus Budget Reconciliation
Act of 1986 (COBRA) entitles employees and their dependents who have been
covered under employer-sponsored health insurance plans to continue their
coverage after their employment has ended or when their work hours have been
reduced. In 1996, the Health Insurance Portability and Accountability Act (HIPAA)
expanded on COBRA. One provision of HIPAA created medical savings accounts,
experimental tax-advantaged accounts that can be used for medical expenses.
If you and your dependents are covered by an employer-sponsored health insurance
plan, COBRA entitles you to continue coverage under circumstances that would
otherwise cause you to lose this benefit. As an employee, you are entitled to
COBRA coverage only if your employment has been terminated or if your hours have
been reduced. However, your dependents may be eligible for COBRA benefits if
they are no longer entitled to employer-sponsored benefits due to divorce,
death, or in certain other situations. Most larger employers are required to
offer COBRA coverage.
However, you can't continue your health insurance coverage
forever. You can continue your health insurance for 18 months under COBRA if
your employment has been terminated or if your work hours have been reduced. If
you're entitled to COBRA coverage for other qualifying reasons, you can continue
your coverage for 36 months.
Keep in mind that you'll have to pay the premium yourself for
COBRA coverage--your employer is not required to pay any part of it. However, if
you're eligible for COBRA coverage and don't have any other health insurance,
you should probably accept it. Even though you'll pay a lot more for coverage
than you did as an employee, it's probably a lot less than you'll pay for
The Health Insurance Portability and Accountability Act of
The Health Insurance Portability and Accountability Act (HIPAA) is an extensive
law that is intended to be the first major step toward healthcare reform in the
United States. Some of its provisions may affect you. The major provisions of
HIPAA do the following:
- Allow workers to move from one employer to another without
fear of losing group health insurance
- Require health insurance companies that serve small groups
(2-50 employees) to accept every small employer that applies for coverage
- Increase the tax deductibility of medical insurance
premiums for the self-employed
- Require health insurance plans to provide inpatient
coverage for a mother and newborn infant for at least 48 hours after a
normal birth or 96 hours after a cesarean section
HIPAA also created medical savings accounts (MSAs), which are
tax-advantaged individual savings accounts that can be used to cover qualified
medical services. Currently, the MSA program is being run on a trial basis. This
experiment is scheduled to expire in 2001, at which time the federal government
will decide whether or not to continue the program.
Presently, only two categories of individuals are eligible to
open MSAs. If you are an employee (or the spouse of an employee) of a company
that employs 50 or fewer employees, you may be eligible to open an MSA.
Additionally, if you are self-employed (or married to a self-employed
individual), you may be eligible to open an MSA.