Throughout a career, workers will face multiple life events, job changes or even job losses. The Consolidated Omnibus Budget Reconciliation Act (COBRA) enacted in 1986 helps workers and their families keep their group health coverage during times of voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, and in certain other cases.
The law gives workers who lose their health benefits the right to choose to continue group health benefits provided by the plan under certain circumstances.
COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end. Dental coverage, vision coverage, flexible spending accounts, and/or healthcare reimbursement arrangements may also be subject to COBRA provisions.
Several events that can cause workers and their family members to lose group health coverage may result in the right to COBRA coverage. These include:
- Voluntary or involuntary termination of the covered employee’s employment for reasons other than “gross misconduct”
- Reduced hours of work for the covered employee
- Covered employee becoming entitled to Medicare
- Divorce or legal separation of a covered employee
- Death of a covered employee; or loss of status as a “dependent child” under plan rules.
Under COBRA, the employee or family member may qualify to keep their group health plan benefits for a set period of time, depending on the reason for losing the health coverage. The following represents some basic information on periods of continuation coverage:
- Reason 1: Termination | Reduced hours
- Reason 2: Employee entitled to Medicare | Divorce or legal separation | Death of covered employee
- Reason 3: Loss of dependent child status
- Reason 1: Employee | Spouse | Dependent child
- Reason 2: Spouse | Dependent child
- Reason 3: Dependent child
Period of Coverage
- Reason 1: 18 months *
- Reason 2: Up to 36 months
- Reason 3: 36 months
*This 18-month period may be extended for all qualified beneficiaries if certain conditions are met in cases where a qualified beneficiary is determined to be disabled for purposes of COBRA.
However, COBRA also provides that your continuation coverage may be cut short in certain cases.
- An initial notice must be furnished to covered employees and dependents at the time of coverage under the plan commences that informs them of their rights under COBRA and describes provisions of the law.
- When the plan administrator is notified that a qualifying event has occurred, it must in turn notify each qualified beneficiary of the right to choose continuation coverage.
- COBRA allows up to 60 days from the date the election notice is mailed for the qualified beneficiary to inform the plan administrator that they elect to continue coverage.
- Under COBRA, the covered participant or a covered family member has the responsibility to inform the plan administrator of a divorce, legal separation, disability, or a child losing dependent status under the plan.
- Employers have a responsibility to notify the plan administrator of the employee’s death, termination of employment, reduction in hours, or Medicare entitlement.
- If covered individuals change their marital status, or their spouses have changed addresses, they must notify the plan administrator.
- Qualified beneficiaries may be required to pay the entire premium for coverage up to 102% of the cost to the plan. Premiums may be higher for persons exercising the disability provisions of COBRA.
- Failure to make timely payments will result in loss of coverage.
- Premiums may be increased by the plan at renewal; however, premiums generally must be set in advance of each 12-month premium cycle.
- Individuals subject to COBRA coverage may be responsible for paying all costs related to deductibles, and may be subject to catastrophic and other benefit limits.
Contact a Corporate Coverage benefits specialist for professional COBRA administration!