The Consolidated Omnibus Budget Reconciliation Act of 1985 requires employers with 20 or more employees to continue to provide health insurance for employees (and covered spouses and dependents) who would otherwise lose their health insurance due to a qualifying event.
If an employee or his/her spouse or dependent is a “qualified beneficiary,” then he or she can elect COBRA coverage.
Generally, a qualified beneficiary is a person who is actually covered by the employer’s health plan on the day before the event causing a termination of coverage occurs.
A qualified beneficiary also includes a child born to or placed for adoption with a qualified beneficiary.
Qualified beneficiaries can choose to continue employer-provided health coverage for up to 18 or 36 months, depending on the type of event that caused the employee to lose coverage.
Events that are “qualifying events” for COBRA purposes are a termination of employment or reduction in hours, divorce or separation, death, entitlement to Medicare and losing dependent status under the plan.
For retired employees, bankruptcy of the employer also is a qualifying event.
If one of these events occurs, the employee and any spouse or dependent eligible under the plan can elect continuation, or COBRA, coverage.
The employee will generally have 60 days to decide whether to elect COBRA coverage. A qualified beneficiary who is eligible for 18 months of COBRA coverage may extend the coverage period to 29 months if he or she becomes disabled or was already disabled during the first 60 days of COBRA coverage.
Generally, the COBRA coverage provided to the employee (or spouse/dependent) must be the same as the coverage the individual had on the day before the qualifying event.
The employee can be asked to pay the entire cost of the insurance premium, including any portion previously paid by the employer.
The employee may also be asked to pay a 2% administrative fee for a total of 102% of the cost of health insurance coverage. An amount up to 150% of the cost of coverage can be charged during the additional 11-month disability extension period.
The COBRA coverage period can be extended from 18 or 29 months (in the event of a disability extension) to 36 months if the beneficiary has a second “qualifying event” during the period of coverage.
However, 36 months is the maximum amount of time an employer is required to provide continuation coverage.
Many group health plans provide an option for participants to convert to individual coverage upon expiration of the group coverage.
If such a conversion option is generally available to similarly-situated non-COBRA beneficiaries, it must also be provided to qualified beneficiaries whose COBRA continuation coverage ends as a result of the expiration of the maximum coverage period.
The conversion option must be provided during the 180-day period that ends on the maximum coverage expiration date. The conversion coverage need not provide the same level of coverage as the group plan.
COBRA imposes two separate notice requirements on employers and plan administrators: (1) Covered employees and their spouses must be given written notice of their continuation rights at the time coverage begins under the plan; and (2) notices must also be provided to qualified beneficiaries when they experience a qualifying event.
Employers and other parties may be liable for penalties if the notice and election requirements are not met.
Since COBRA became law in 1985, other laws have been enacted that affect COBRA’s provisions.
The Health Insurance Portability and Accountability Act is one such law. Also, the Family and Medical Leave Act affects COBRA requirements, as does Medicare and various state laws.
Notably, as of October 1, 1997, Connecticut law requires all group health insurance plans (regardless of the number of individuals covered) to include continuation coverage provisions virtually identical to COBRA.
As a result, employers of fewer than 20 employees that have group health insurance have the same continuation obligations that larger employers have under the federal COBRA.
CBIA COBRA Administration
CBIA offers COBRA Administration services to existing Health Connections members. This program is available only to CBIA Health Connections members.
Because we already maintain the information required to administer your health insurance plans, we can offer you a cost-effective COBRA administration program that will take care of the many details required to stay in compliance with both federal and state laws.
- FAQ: COBRA & HIPAA
- U.S. Department of Labor: Continuation of Health Coverage
- HIPAA Notice of Creditable Coverage