What is COBRA?

COBRA requires employers with 20+ employees that have a group health plan to offer continuation of coverage when a "qualifying event" is experienced. Read the specifics of the law below.

*Basic Concept

COBRA Manuals In 1985, the Consolidated Omnibus Budget Reconciliation Act (known as COBRA) was passed to offer employees continuation of group health insurance upon experiencing a "qualifying event" that causes a loss of coverage. The law requires employers to act as the liaison (and not the insurance company) to offering this continuation coverage, collect premiums, track enrollment time frame, provide information at insurance plan renewal, extend the maximum time frame when "multiple qualifying events" occur and terminate coverage upon completion. Employees and/or dependents electing to continue coverage, will receive the benefits at the group cost (plus a 2% administration fee).

Mandated Firms

United States-based employers (with 20 or more employees on 50% of the business days in the previous calendar year) that offer a "Health Benefit Plan" (such as an employer-sponsored medical, dental, vision, HRA, FSA, EAP, etc.) are required to offer COBRA continuation coverage to Eligible Employees and their covered dependents. Due to the complexity of the law, many employers have decided to outsource to an experienced COBRA Administrator.

Eligible Employees

To be eligible for COBRA continuation coverage, an employee and covered dependents must be enrolled on a group health insurance plan on the day prior to the "qualifying event" and experience a loss of coverage.

Qualifying Events

The following events experienced by both the employee and their covered dependents will trigger the employer needing to send a Qualifying Event Letter and offer the "Qualifier" 18 months (or 36 months for events 3 - 6) of continuation coverage:

  • 1) Termination of employment;
  • 2) Reduction in work hours;
  • 3) Divorce or legal separation;
  • 4) Employee's death;
  • 5) Employee becomes eligible for Medicare AND is involuntarily removed; and
  • 6) Child loses "dependent status" under the plan.

Some states such as California, New York, Connecticut and Texas have state laws that provided additional months of coverage upon completing time under Federal COBRA. (Our administration will continue to provide coverage when dictated by state law.)

Required Notices

Mandated Employers (or their contracted Administrators) must mail a letter to employees and/or covered dependents when one of the above events is experienced within 44 days from the date of the event. The law is very specific as to what information must be provided in the notices and who should be contacted in the event they have questions.

Employers are required to provide the following notices:
  • 1) A General Notice designed to explain COBRA to new employees;
  • 2) A Qualifying Event Letter;
  • 3) An Open Enrollment letter detailing plan changes;
  • 4) A Premium Short Notification;
  • 5) The Unavailability of COBRA notice; and
  • 6) A Termination from COBRA letter.

Election and Payment Grace Periods

Employees and/or covered dependents have 60 days from the date of the qualifying event letter to notify the employer of their desire to continue coverage. If elected, coverage is retroactively reinstated so there is no lapse in coverage. From the date the Qualifier elects, they are provide a 45 day grace period to make their first premium payment. (Electing Qualifier's claims will not be paid until this payment is received.) Subsequent payments will have a 30 day grace period. If premium payment is not received within these grace periods, Participants will be terminate with no option of reinstatement.

Multiple Qualifying Events

If an employee experiences a termination or reduced work hours, elects COBRA and a covered dependent experiences a divorce/legal separation, employee's death or a child's loss of "dependent status," they should be offered an additional 18 month (for a total of 36 months) of continuation coverage. (These dependents must notify the Administrator within 60 days of the event to receive the additional months of coverage.)

Disability Extension

Disability Extension For employees who were terminated or had their hours reduced and they (or covered dependent) are deemed "disabled" by the Social Security Administration (SSA) prior to their 60th day on COBRA, the employer should provide an 11 month extension (for a total of 29 months). To receive the extension, the participant is required to provide the SSA determination within 60 days from the date of determination notice and prior to the end of their 18 months on COBRA. The medical insurance plan may charge the disabled dependent 150% of the group employee rate (during the 11 month extension). Regardless of who is deemed disabled, all enrolled family members receive the extension. If the disabled individual is no longer considered disabled by the SSA, they are required to notify the employer within 30 days after the date SSA's determination.

COBRA Completion

COBRA will end on the earliest of the following dates:
  • On the day the Participant has completed his/her total time frame (18, 29 or 36 months) under COBRA;
  • On the paid through date, if the participant does not meet the initial 45 day (30 days thereafter) grace period to pay premiums;
  • On the paid through date, if the participant voluntarily terminates continuation coverage;
  • On the day the employee/dependent becomes eligible for Medicare, Medicaid or obtains other coverage; or
  • On the day the employer terminates the group plan for all employees.

* The above summary is a general description of the Consolidated Omnibus Budget Reconciliation Act (and its amendments) and should not be considered as legal advice. COBRA Solutions, Inc. requests you contact a Benefits Attorney for interpretation on the law.