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Alabama Health Insurance Plan and Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)

Alabama Health Insurance Plan

The Alabama health insurance Plan is designed for people who have exhausted coverage through a group plan and are not eligible for other group coverage, Medicare, Medicaid or are covered under any other health insurance plan. Administered by the State of Alabama, AHIP offers a traditional indemnity policy (Blue Cross) and a managed care policy (United Healthcare) to residents of the state of Alabama who meet certain qualifications.

Created by state law, AHIP is designed to meet the standards of the Health Pnsurance Portability and Accountability Act (HIPAA) of 1996. HIPAA is a federal law that helps make health insurance available to anyone who has been enrolled in a health insurance plan. However, your last month of prior coverage must have been through a group employer plan or COBRA coverage. If you are eligible for AHIP you will have no waiting periods for pre-existing conditions.

COBRA

What Is COBRA and How Do I Use It?

COBRA is the abbreviation for Consolidated Omnibus Budget Reconciliation Act of 1986. This federal law requires employers (including self-insured employers) with 20 or more employees to offer continued coverage to a former employee and his or her dependents for up to 18 months after the employee has left the company.

Under COBRA, following an employee's death or divorce, the employee's family has the right to continue coverage for up to 3 years.

COBRA requirements do not apply to group health plans established or maintained by the federal government or to church plans that are set up by churches, which are tax exempt under Section 501 of the Internal Revenue Code.

When can you choose to continue using your former employer's group health insurance?

You have the option to use your former employer's health plan if you have a "qualifying event" that results in the loss of coverage. Examples of qualifying events include the following scenarios.

  • You quit work or are laid off, retire, or are fired (not for gross misconduct).
  • Your hours are reduced so you no longer qualify for the group plan.
  • You are legally separated or divorced.
  • Your child no longer qualifies as a dependent under your employer's plan.
  • You die (a qualifying event for your family).
  • You become eligible for, or enrolled in, Medicare (a qualifying event for your family).
How long can you or your dependents continue group health coverage?

The period of time you can continue with group coverage depends on your needs to extend coverage outside your employer's or former employer's health plan benefits.

Type of Individual

Length of Continued Group Health Coverage Under COBRA

Former employee and his/her spouse and children

Up to 18 months

Disabled employee and his/her spouse and children

Up to 29 months

Dependent child who is disabled or becomes disabled within 60 days of being off group health coverage

Up to 29 months

Children no longer qualifying as a dependent (dependent age limits vary from 19 to 25 years of age)

Up to 36 months

Spouse who is legally separated, divorced, or widowed

Up to 36 months

Dependent children living with spouse who is legally separated or divorced

Up to 36 months

Dependent children of a deceased employee

Can continue until they no qualify as dependents

How do you sign up for continuation coverage?

Your employer is required to provide you with information on electing to continue coverage if you are fired, laid off, or retire. The information will tell you how to make this election and how much it will cost.

Under federal law, you must receive this information from your employer within 44 days of when a qualifying event takes place. The information will be sent to your home.

Federal law gives you 60 days from the date that the informational notice is received or coverage would otherwise end to elect continuation coverage. You have the right to initially refuse continuation coverage and then change your mind before the 60-day election period ends.

If you elect coverage within the 60-day period and pay the applicable premiums, your coverage will be retroactive to the date of the qualifying event. The first premium is due within 45 days after you elect continuation coverage. Federal COBRA provides a 30-day grace period to pay the remaining monthly premiums.

How much will it cost to continue group coverage?

Your employer can charge you 100% of the premium plus a 2% administrative cost.

A child who no longer qualifies as a dependent will be charged no more than 102% of the total cost for an individual covered under the group plan.

A person who becomes disabled while on continued coverage cannot be required to pay more than 150% of the total health plan costs for a similarly situated person for months 19–29.

Can continued group coverage be lost?

Yes, there are situations in which you can lose your continued group coverage, such as the following scenarios.

  • Your former employer stops offering group health insurance.
  • You fail to pay the premium on time.
  • You attain health insurance through another group health plan.
  • Your coverage is with a health maintenance organization (HMO), and you move outside of the HMO’s covered areas.

Where can I find more information?

For more information on COBRA, contact the U.S. Department of Labor.

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