If you qualify and your employer is subject to the rules, COBRA (Consolidated Omnibus Reconciliation Act of 1985) is a federal law that allows for 18 to 36 months of continued healthcare coverage, meaning medical, prescription, dental and vision plans, wellness programs, drug/alcohol treatment programs and some other programs. The time frame depends on the reason for termination. In other words, under COBRA, you can choose to continue your healthcare coverage for a certain period of time, but you pay the cost out of your own pocket but get the group rate. In some cases, an additional fee (often 2 percent) is charged by your employer to cover administrative costs.

COBRA usually applies to employees and/or their eligible dependents who involuntarily lose coverage, such as through layoffs or terminations, cutbacks in working hours that make you ineligible for group coverage, as well as death, separation or divorce that lead to someone previously covered to be no longer on the plan. You will generally be covered if you are terminated for reasons other than gross misconduct. I emphasize the term generally, however, because there a variety of rules and exceptions involved. (Hey, we're dealing with the IRS here -- nothing is simple.)

Laid-off employees usually qualify for 18 months. Spouses and children of a deceased worker are generally eligible for 36 months. I apologize for all the generally and usually, but the provisions of the code are so complex that each situation has to be looked at individually. For more information, you can see the National Conference of State Legislatures Health Committee Bill Summary: The Health Insurance Portability and Accountability Act of 1996. The law does not apply to plans sponsored by the U.S. government or certain church-related groups.

-- Answered by Carmen Petote, certified financial planner at Allegiance Financial Advisors, Inc.

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