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Congress passed the landmark Consolidated Omnibus Budget
Reconciliation Act (COBRA) health benefit provisions in 1986. The
law amends the Employee Retirement Income Security Act, the Internal
Revenue Code and the Public Health Service Act to provide
continuation of group health coverage that otherwise might be
terminated.
COBRA provides certain former employees, retirees, spouses, former
spouses, and dependent children the right to temporary continuation
of health coverage at group rates. This coverage, however, is only
available when coverage is lost due to certain specific events.
Group health coverage for COBRA participants is usually more
expensive than health coverage for active employees, since usually
the employer pays a part of the premium for active employees while
COBRA participants generally pay the entire premium themselves.
If you are leaving your employer, cobra insurance is generally much
more expensive than what an individual or family coverage might
cost. Save now with free quotes!
There are three elements to qualifying for COBRA benefits. COBRA
establishes specific criteria for plans, qualified beneficiaries,
and qualifying events:
Plan Coverage - Group health plans for
employers with 20 or more employees on more than 50 percent of its
typical business days in the previous calendar year are subject to
COBRA. Both full and part-time employees are counted to determine
whether a plan is subject to COBRA. Each part-time employee counts
as a fraction of an employee, with the fraction equal to the number
of hours that the part-time employee worked divided by the hours an
employee must work to be considered full time.
Qualified Beneficiaries - A qualified
beneficiary generally is an individual covered by a group health
plan on the day before a qualifying event who is either an employee,
the employee's spouse, or an employee's dependent child. In certain
cases, a retired employee, the retired employee's spouse, and the
retired employee's dependent children may be qualified
beneficiaries. In addition, any child born to or placed for
adoption with a covered employee during the period of COBRA coverage
is considered a qualified beneficiary. Agents, independent
contractors, and directors who participate in the group health plan
may also be qualified beneficiaries.
Qualifying Events - Qualifying events are
certain events that would cause an individual to lose health
coverage. The type of qualifying event will determine who the
qualified beneficiaries are and the amount of time that a plan must
offer the health coverage to them under COBRA. A plan, at its
discretion, may provide longer periods of continuation coverage.
Qualifying Events for
Employees:
Qualifying Events for Spouses:
-
Voluntary or involuntary
termination of the covered employee's employment for any reason
other than gross misconduct
-
Reduction in the hours worked
by the covered employee
-
Covered employee's becoming
entitled to Medicare
-
Divorce or legal separation of
the covered employee
-
Death of the covered employee
Qualifying Events for Dependent
Children:
-
Loss of dependent child status
under the plan rules
-
Voluntary or involuntary
termination of the covered employee's employment for any reason
other than gross misconduct
-
Reduction in the hours worked
by the covered employee
-
Covered employee's becoming
entitled to Medicare
-
Divorce or legal separation of
the covered employee
-
Death of the covered employee
To be eligible for COBRA coverage, you must have been enrolled in
your employer's health plan when you worked and the health plan must
continue to be in effect for active employees. COBRA continuation
coverage is available upon the occurrence of a qualifying event that
would, except for the COBRA continuation coverage, cause an
individual to lose his or her health care coverage.
The law generally covers health plans maintained by private-sector
employers with 20 or more employees, employee organizations, or
state or local governments.
Employers must notify plan administrators of a qualifying event
within 30 days after an employee's death, termination, reduced hours
of employment or entitlement to Medicare.
A qualified beneficiary must notify the plan
administrator of a qualifying event within 60 days after divorce or
legal separation or a child's ceasing to be covered as a dependent
under plan rules.
Plan participants and beneficiaries generally
must be sent an election notice not later than 14 days after the
plan administrator receives notice that a qualifying event has
occurred. The individual then has 60 days to decide whether to
elect COBRA continuation coverage. The person has 45 days after
electing coverage to pay the initial premium.
Qualified beneficiaries must be given an election period during
which each qualified beneficiary may choose whether to elect COBRA
coverage. Each qualified beneficiary may independently elect COBRA
coverage. A covered employee or the covered employee's spouse may
elect COBRA coverage on behalf of all other qualified
beneficiaries. A parent or legal guardian may elect on behalf of a
minor child. Qualified beneficiaries must be given at least 60 days
for the election. This period is measured from the later of the
coverage loss date or the date the COBRA election notice is provided
by the employer or plan administrator. The election notice must be
provided in person or by first class mail within 14 days after the
plan administrator receives notice that a qualifying event has
occurred.
Health plan rules must explain how to obtain benefits and must
include written procedures for processing claims. Claims procedures
must be described in the Summary Plan Description.
You should submit a claim for benefits in
accordance with the plan's rules for filing claims. If the claim is
denied, you must be given notice of the denial in writing generally
within 90 days after the claim is filed. The notice should state
the reasons for the denial, any additional information needed to
support the claim, and procedures for appealing the denial.
You will have at least 60 days to appeal a denial
and you must receive a decision on the appeal generally within 60
days after that.
Contact the plan administrator for more
information on filing a claim for benefits. Complete plan rules are
available from employers or benefits offices. There can be charges
up to 25 cents a page for copies of plan rules.
Yes, disability can extend the 18 month period of continuation
coverage for a qualifying event that is a termination of employment
or reduction of hours. To qualify for additional months of COBRA
continuation coverage, the qualified beneficiary must:
-
Have a
ruling from the Social Security Administration that he or she
became disabled within the first 60 days of COBRA continuation
coverage
-
Send the plan a
copy of the Social Security ruling letter within 60 days of
receipt, but prior to expiration of the 18-month period of
coverage
If these requirements are met,
the entire family qualifies for an additional 11 months of COBRA
continuation coverage. Plans can charge 150% of the premium cost
for the extended period of coverage.
Under COBRA, participants, covered spouses and dependent children
may continue their plan coverage for a limited time when they would
otherwise lose coverage due to a particular event, such as divorce
(or legal separation). A covered employee’s spouse who would lose
coverage due to a divorce may elect continuation coverage under the
plan for a maximum of 36 months. A qualified beneficiary must
notify the plan administrator of a qualifying event within 60 days
after divorce or legal separation. After being notified of a
divorce, the plan administrator must give notice, generally within
14 days, to the qualified beneficiary of the right to elect COBRA
continuation coverage.
Divorced spouses may call their plan
administrator or the EBSA Toll-Free number, 1.866.444.EBSA (3272) if
they have questions about COBRA continuation coverage or their
rights under ERISA.
If a qualified beneficiary waives COBRA coverage during the election
period, he or she may revoke the waiver of coverage before the end
of the election period. A beneficiary may then elect COBRA
coverage. Then, the plan need only provide continuation coverage
beginning on the date the waiver is revoked.
Qualified beneficiaries must be offered coverage identical to that
available to similarly situated beneficiaries who are not receiving
COBRA coverage under the plan (generally, the same coverage that the
qualified beneficiary had immediately before qualifying for
continuation coverage). A change in the benefits under the plan for
the active employees will also apply to qualified beneficiaries.
Qualified beneficiaries must be allowed to make the same choices
given to non-COBRA beneficiaries under the plan, such as during
periods of open enrollment by the plan.
COBRA coverage begins on the date that health care coverage would
otherwise have been lost by reason of a qualifying event.
COBRA establishes required periods of coverage for continuation
health benefits. A plan, however, may provide longer periods of
coverage beyond those required by COBRA. COBRA beneficiaries
generally are eligible for group coverage during a maximum of 18
months for qualifying events due to employment termination or
reduction of hours of work. Certain qualifying events, or a second
qualifying event during the initial period of coverage, may permit a
beneficiary to receive a maximum of 36 months of coverage.
Coverage begins on the date that coverage would
otherwise have been lost by reason of a qualifying event and will
end at the end of the maximum period. It may end earlier if:
-
Premiums are not paid on a
timely basis
-
The employer ceases to
maintain any group health plan
-
After the COBRA election,
coverage is obtained with another employer group health plan
that does not contain any exclusion or limitation with respect
to any pre-existing condition of such beneficiary. However, if
other group health coverage is obtained prior to the COBRA
election, COBRA coverage may not be discontinued, even if the
other coverage continues after the COBRA election.
-
After the COBRA election, a
beneficiary becomes entitled to Medicare benefits. However, if
Medicare is obtained prior to COBRA election, COBRA coverage may
not be discontinued, even if the other coverage continues after
the COBRA election.
Although COBRA specifies certain periods of time
that continued health coverage must be offered to qualified
beneficiaries, COBRA does not prohibit plans from offering
continuation health coverage that goes beyond the COBRA periods.
Some plans allow participants and beneficiaries
to convert group health coverage to an individual policy. If this
option is generally available from the plan, a qualified beneficiary
who pays for COBRA coverage must be given the option of converting
to an individual policy at the end of the COBRA continuation
coverage period. The option must be given to enroll in a conversion
health plan within 180 days before COBRA coverage ends. The premium
for a conversion policy may be more expensive than the premium of a
group plan, and the conversion policy may provide a lower level of
coverage. The conversion option, however, is not available if the
beneficiary ends COBRA coverage before reaching the end of the
maximum period of COBRA coverage.
Beneficiaries may be required to pay for COBRA coverage. The
premium cannot exceed 102 percent of the cost to the plan for
similarly situated individuals who have not incurred a qualifying
event, including both the portion paid by employees and any portion
paid by the employer before the qualifying event, plus 2 percent for
administrative costs.
For qualified beneficiaries receiving the 11
month disability extension of coverage, the premium for those
additional months may be increased to 150 percent of the plan's
total cost of coverage.
COBRA premiums may be increased if the costs to
the plan increase but generally must be fixed in advance of each
12-month premium cycle. The plan must allow you to pay premiums on
a monthly basis if you ask to do so, and the plan may allow you to
make payments at other intervals (weekly or quarterly).
The initial premium payment must be made within
45 days after the date of the COBRA election by the qualified
beneficiary. Payment generally must cover the period of coverage
from the date of COBRA election retroactive to the date of the loss
of coverage due to the qualifying event. Premiums for successive
periods of coverage are due on the date stated in the plan with a
minimum 30-day grace period for payments. Payment is considered to
be made on the date it is sent to the plan.
If premiums are not paid by the first day of the
period of coverage, the plan has the option to cancel coverage until
payment is received and then reinstate coverage retroactively to the
beginning of the period of coverage.
If the amount of the payment made to the plan is
made in error but is not significantly less than the amount due, the
plan is required to notify you of the deficiency and grant a
reasonable period (for this purpose, 30 days is considered
reasonable) to pay the difference. The plan is not obligated to
send monthly premium notices.
COBRA beneficiaries remain subject to the rules
of the plan and therefore must satisfy all costs related to
co-payments and deductibles, and are subject to catastrophic and
other benefit limits.
When you were an active employee, your employer may have paid all or
part of your group health premiums. Under COBRA, as a former
employee no longer receiving benefits, you will usually pay the
entire premium amount, that is, the portion of the premium that you
paid as an active employee and the amount of the contribution made
by your employer. In addition, there may be a 2 percent
administrative fee.
While COBRA rates may seem high, you will be
paying group premium rates, which are usually lower than individual
rates.
Since it is likely that there will be a lapse of
a month or more between the date of layoff and the time you make the
COBRA election decision, you may have to pay health premiums
retroactively-from the time of separation from the company. The
first premium, for instance, will cover the entire time since your
last day of employment with your former employer.
You should also be aware that it is your
responsibility to pay for COBRA coverage even if you do not receive
a monthly statement.
Although they are not required to do so, some
employers may subsidize COBRA coverage.
The Family and Medical Leave Act, effective August 5, 1993, requires
an employer to maintain coverage under any group health plan for an
employee on FMLA leave under the same conditions coverage would have
been provided if the employee had continued working. Coverage
provided under the FMLA is not COBRA coverage, and FMLA leave is not
a qualifying event under COBRA. A COBRA qualifying event may occur,
however, when an employer's obligation to maintain health benefits
under FMLA ceases, such as when an employee notifies an employer of
his or her intent not to return to work.
Further information on FMLA is available from the
nearest office of the Wage and Hour Division, listed in most
telephone directories under U.S. Government, U.S. Department of
Labor, Employment Standards Administration.
COBRA continuation coverage laws are administered by several
agencies. The Departments of Labor and Treasury have jurisdiction
over private-sector health group health plans. The Department of
Health and Human Services administers the continuation coverage law
as it affects public-sector health plans.
The Labor Department's interpretive and
regulatory responsibility is limited to the disclosure and
notification requirements of COBRA. If you need further information
on your disclosure or notification rights under a private-sector
plan, or about ERISA generally, telephone EBSA's Toll-Free number
at: 1.866.444.3272, or write to:
U.S. Department of Labor
Employee Benefits Security Administration
Division of Technical Assistance and Inquiries
200 Constitution Avenue NW, Suite N-5619
Washington, DC 20210
The Internal Revenue Service, Department of the
Treasury, has issued regulations on COBRA provisions relating to
eligibility, coverage and premiums in 26 CFR Part 54, Continuation
Coverage Requirements Applicable to Group Health Plans. Both the
Departments of Labor and Treasury share jurisdiction for enforcement
of these provisions.
The Center for Medicare and Medicaid Services
offers information about COBRA provisions for public-sector
employees. You can write them at this address:
Centers for Medicare and Medicaid Services
7500 Security Boulevard
Mail Stop C1-22-06
Baltimore, MD 21244-1850
Tel 1.877.267.2323 x61565
Federal employees are covered by a law similar to COBRA. Those
employees should contact the personnel office serving their agency
for more information on temporary extensions of health benefits.
If there is no longer a health plan, there is no COBRA coverage
available. If, however, there is another plan offered by the
company, you may be covered under that plan. Union members who are
covered by a collective bargaining agreement that provides for a
medical plan also may be entitled to continued coverage.
Employers or health plan administrators must provide an initial
general notice if you are entitled to COBRA benefits. You probably
received the initial notice about COBRA coverage when you were
hired.
When you are no longer eligible for health
coverage, your employer has to provide you with a specific notice
regarding your rights to COBRA continuation benefits.
Employers must notify their plan administrators
within 30 days after an employee's termination or after a reduction
in hours that causes and employee to lose health benefits.
The plan administrator must provide notice to
individual employees of their right to elect COBRA coverage within
14 days after the administrator has received notice from the
employer.
You must respond to this notice and elect COBRA
coverage by the 60th day after the written notice is sent or the day
health care coverage ceased, whichever is later. Otherwise, you
will lose all rights to COBRA benefits.
Spouses and dependent children covered under your
health plan have an independent right to elect COBRA coverage upon
your termination or reduction in hours. If, for instance, you have
a family member with an illness at the time you are laid off, that
person alone can elect coverage.
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