COBRA: Your Questions Answered
Posted on July 7, 2014
What is COBRA?
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, was passed in 1986 to provide a temporary continuation of healthcare coverage through employers for those who would have lost coverage based on certain events. As a general rule, COBRA applies to healthcare plans for private-sector employers with twenty or more employees.
Who is entitled to coverage?
COBRA covers people who were employees with qualifying coverage, but then lost their healthcare coverage based on certain qualifying events.
What is a qualifying event?
There is a range of different events that would qualify someone to receive coverage through COBRA; all of them are events that would result in the loss of health coverage for an employee or someone under the employee’s group coverage. These events include:
- Termination of employment (for reasons other than gross
* Reduction of hours
* Employee becomes disabled
* Death or divorce of employee
* Dependent child loses dependent status
* Employee becoming entitled to Medicare
How do I handle the qualifying event notice? The election notice?
When one of these events occurs, the group health plan must be notified,* but depending on the particular event, this responsibility changes hands.* Within 30 days, the employer must notify the plan if coverage is lost because of termination, reduction of hours, death of a covered employee, or the employee becoming entitled to Medicare. Within 60 days, the employee must notify the group health plan if the qualifying event is divorce, legal separation, or loss of the child’s dependent status.
The benefits plan provider must provide the employee with an election notice within 14 days of receiving the qualifying notice. The election notice will include all information about the plan and what will happen if the employee opts into or waives COBRA coverage. Employees will have a minimum of 60 days after receiving the notice to choose whether or not to continue coverage with their current plan.
How long does coverage last?
Depending on the qualifying event, employees are entitled to different lengths of coverage. Generally, the maximum length of coverage is:
* 18 months for termination and/or reduction of hours
* 29 months for cases involving disability
* 36 months for death of a covered employee or divorce
Should I choose COBRA or look for a new plan?
COBRA usually ends up costing more than other available plans because employers can charge 102% of the cost of the same plan for their employees (the value of coverage plus 2% for administrative costs). However, some employees still choose COBRA because they want to keep their current network of providers. Also, if you are happy with your plan, you may not want to start over with a new deductible, even if your premium will probably be higher.
What are the consequences of non-compliance?
Failure to comply by not providing coverage or proper notification results in monetary penalties.
For more information about COBRA and how it may apply to you, check out the Department of Labor’s webpage.