COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, was passed in 1986. This act allows you and your family to continue coverage under your company's group healthcare plan if you leave your company or your employer reduces your work hours. The act, which applies to companies with 20 or more employees, allows you to continue your healthcare coverage for a limited time following voluntary or involuntary job loss for reasons other than gross misconduct. Qualified beneficiaries also can receive coverage under COBRA following the death of or divorce from the affected employee.

Generally speaking, you qualify for COBRA if you were enrolled in your company's group health plan at the time you left the company, if the plan remains in effect for current employees. Under the law, retirees and their family members—including spouses, former spouses, and dependent children—also can receive benefits under COBRA under certain circumstances, known as “qualifying events.” A qualifying event determines who is considered a beneficiary and the amount of time a beneficiary can receive coverage under COBRA. Usually, you and your qualified beneficiaries can receive COBRA coverage for up to 18 months. Generally speaking, COBRA benefits are more expensive than coverage for active employees, but they are less expensive than individual healthcare plans. Despite the increased cost, however, COBRA is usually offered at the same benefit level as coverage for active employees.

To qualify for additional months of COBRA, you must obtain a ruling from the Social Security Administration saying that you became disabled within the first 60 days of coverage. To qualify for additional coverage, you also must send your healthcare plan a copy of the Social Security ruling letter within 60 days of receipt but before your 18 months of coverage expires. Provided that these requirements are met, you and your qualified beneficiaries can be covered for an additional 11 months at a rate of up to 150 percent of the premium cost.