COBRA: Your Questions Answered
COBRA: Your Questions Answered

COBRA: Your Questions Answered

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 misconduct)
    * 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.


_Sources: Department of Labor, TLNT.com

More to Discover

What is a W-4 Form?

What is a W-4 Form?

What is a W-4 Form? W-4 forms are essentially very basic tax returns filled out by employees. Specifically, it tells employers the correct amount of tax to withhold from the employee’s paycheck. Need a W-4 Form? Download it here. Why are W-4s important? The accuracy of an employee’s W-4 submission will determine the size of their tax refund (or bill) at the end of the year. The amount withheld should be as close as possible to their actual tax obligation—a big deficit can be an unwelcome surprise and may be accompanied by further penalties. Withholding more than necessary is considered by some employees as an easy way to save but, while refunds may seem like a nice treat, you are taking away the chance for employees to invest (or use)...

Case Study: Price Brothers, Inc.

Case Study: Price Brothers, Inc.

A need for robust reporting tools and a modern HR and payroll platform with onboarding capabilities led Price Brothers, Inc., to Paycor. “We’re constantly hiring and looking for skilled trade help on a daily basis. Now they can fill out the application online and we can email them the new-hire paperwork. They can complete everything online before their first day.” - Kim McLaughlin, CFO, Price Brothers, Inc. Why Price Brothers, Inc., left their payroll provider Price Brothers, a Charlotte, N.C.-based plumbing contractor who specializes in new-home construction, needed a more modern HR and payroll platform that could keep up with their growing business. Their former solution wasn’t intuitive and didn’t collect all the data they needed for...

How to Pay 1099 Employees

How to Pay 1099 Employees

As the gig economy grows more employers are looking to hire independent contractors (aka 1099 workers). But since paying independent contractors isn’t a walk in the park, many employers are looking for step-by-step instructions. Here’s a breakdown of everything you need to know: How Do I Pay a 1099 Worker? This subject is something you will need to discuss in detail with the person you’re hiring for the job. Often, they will have a written contract that stipulates how and when they should be paid. The two most common methods of payment are hourly and by the job or project. Some independent contractors — such as attorneys — prefer to be paid on retainer, which means you pay them a lump sum at the beginning of each month in return for a...

States with Salary History Bans

States with Salary History Bans

Requesting job applicants’ salary histories has been a pretty common practice for employers over the years. Recruiters and hiring managers often use this knowledge to exclude people from the candidate pool, either because the applicant is “too expensive” or their previous salary is so low, hiring managers think the person is poorly qualified or inexperienced.Businesses have also used previous salary information to calculate new hire compensation—a process that can perpetuate pay disparity between women and men. To address this inequality, several states and municipalities have enacted bans on asking for previous salary information, although laws vary in terms, scope and applicability. The states and territories that have enacted salary...