Are Contract Workers Entitled to COBRA Benefits?

There are around 44 million contract and temporary workers in the U.S. today. During the pandemic, there was growth in this labor sector because many full-time workers lost their jobs and started their own contract businesses. There are still more self-employed contractors that do this work in addition to their full-time positions. Self-employment in the form of contracting is here to stay—and growing. But what about healthcare for this workforce? In a country that doesn’t have a national healthcare system for those under 65, what options are available. Can contract workers who have lost their full-time jobs even get COBRA benefits? We have answers that show contractors have a surprising number of options when it comes to their benefits.

What Are COBRA Benefits and Are Your Contract Worked Entitled to Them?

Healthcare Options for Contractors

Since the inception of ObamaCare (the Affordable Care Act), the federal government has maintained a healthcare marketplace for individuals and families. There are also resources for self-employed businesses with up to 50-employees. However, some states have their own insurance marketplaces, so do a little research before exploring this option. Pre-existing conditions as well as 10 essential health benefits are covered by these plans. Some states may go above and beyond this coverage, as well.

But what about the full-time worker who ends up contracting, whether through choice or a layoff? Can they get COBRA to extend their benefits?

What is COBRA?

COBRA is a type of continuing healthcare coverage that allows former employers to continue group health benefits at an individual or family rate. The coverage is limited to a certain number of months; the idea is that this coverage is temporary while you find a more permanent solution. It’s a good option if you’ve left a full-time job to do contract work. The only catch is that you must be enrolled in a work-sponsored health insurance plan before the qualifying event that led to your unemployed or contractor status.

The costs of COBRA depend on the type of insurance you had at your former company. If you’re employer covered all or part of the premium payments, the COBRA bill is going to be a shock. Basically, you are responsible for your healthcare, and like coverage under the Affordable Care Act, it’s anything but truly affordable.

One bright spot? If you have a health savings account, you can use it to pay your COBRA insurance premiums. COBRA, however, is the only insurance premium you can pay from your HSA.

Can Contractors Receive COBRA Benefits?

Yes, contractors can fall under COBRA as long as they were enrolled in a qualified employer health plan before they lost their job. This includes any family members covered under that plan. With that said, the rules state, “When a covered employee is terminated for gross misconduct, COBRA does not have to be offered to either the employee or their dependents.” It should also be noted that COBRA does not apply to companies that have less than 20 employees. However, state laws may mitigate this rule. Check with your HR manager before leaving your full-time position about all your options.

Should Contract Workers Receive COBRA Benefits?

You may also receive benefits if you’re contracting for a company like FoxHire. As an Employer of Record (EOR), we offer our business clients a plug-and-play way to manage their contract workforce. For contractors, we offer a rich set of health insurance benefits as part of your contract agreement. If you’re considering the contract lifestyle, call on us to find out how we can help with better pay and benefits.