Consolidated Omnibus Budget Reconciliation Act (COBRA)
In 1986, Congress passed COBRA to provide continuation of group health coverage for employees and their families in certain situations, such as when there is a voluntary or involuntary job loss, reduction in the number of hours worked, transition between jobs, death, divorce or other life changing events. Under COBRA, employee family members may also continue coverage. If you qualify for COBRA, you have 60 days in which to opt to continue your benefits. COBRA is not free. An employer may charge you up to 102 percent of what it is paying for the group level of coverage you elect.
Are all group plans covered by COBRA?
No. COBRA applies only to plans where the employer has 20 or more employees. However, the government does require that part-time employees count as a fraction of an employee based upon the number of hours worked.
Who is entitled to benefits?
There are three requirements to be eligible for benefits:
- You belonged to a group health plan with at least 20 employees.
- You are a qualified beneficiary.
- You lost your group health insurance as a result of a qualifying event.
What does it mean to be a "qualified beneficiary"?
A qualified beneficiary is usually a person who had coverage on the day before the qualifying event took place. It could be an employee, their spouse or dependent child.
What are "qualifying events" under COBRA?
These are the circumstances under which COBRA allows an individual to continue health care coverage. The qualifying event does not have to just happen to the employee; it can happen for a spouse or dependent child as well. Qualifying events are as follows:
For employees:
- Voluntary or involuntary separation from employment except in cases of gross misconduct; or
- Reduction in the number of hours of employment.
For spouses:
In addition to the two reasons given above for the employee:
- The covered employee becomes entitled to Medicare;
- Divorce or legal separation from the covered employee; or
- Death of the covered employee.
For dependent children:
All of the items listed for spouses with the addition of:
- Loss of dependent child status.
I recently quit my job. Can I still receive health benefits under my former employer's health care plan?
If you meet the criteria above, your company had 20 or more employees, you were covered by an employer plan and you left under circumstances other than gross misconduct, the answer is yes.
Why should I bother to stay under my former employer's health care plan if I have to pay full price?
While it may seem expensive, your former employer is most likely getting a group rate discount for the health care coverage it provides. If you purchased an equivalent plan on your own, it is unlikely that you would be able to do so at a rate as competitive as the employer's group rate.
What benefits are covered under COBRA?
The benefits offered have to be the same as for all others in the health care plan (i.e., those not under COBRA). So unless the employer changed the plan benefits, you should receive the same benefits you received when you were still an employee.
My divorce will be finalized soon. Can I still get health coverage under my spouse's group plan?
Yes. Under COBRA, you and any covered dependent children can continue your plan coverage. Under the law you can continue coverage up to a maximum of 36 months. However, you must notify the plan administrator within 60 days of the divorce or separation that you wish to elect COBRA coverage.
TIP: Anyone who is eligible for COBRA coverage has 60 days to decide whether to elect coverage.
My company went out of business. Can I still get health care coverage?
If there is no longer a health care plan, then there will be no coverage available under COBRA.
How long does COBRA coverage last?
|
TIP: For more information see the U.S. Department of Labor Web site www.dol.gov/ebsa.