Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed to protect employees from the loss of healthcare coverage in certain situations. Specifically, it allows an employee or an employee's dependent who is a beneficiary under an employee's healthcare plan to maintain health coverage when a qualifying event causes a loss of coverage. COBRA applies to employers with 20 or more employees. Show Note: Some states have passed mini-COBRA statutes to help an employee maintain coverage when the federal law does not apply. Next Article: Health Insurance Portability and Accountability Act (HIPAA) Back to: EMPLOYMENT LAWS What is a Qualifying Event under COBRA?A qualifying event is defined as:
Situations where an employee remains employed but voluntarily cancels healthcare coverage or when an employee loses coverage for not paying are not qualifying events. What is the Period of Employee Protection under COBRA?COBRA allows the employee to purchase continuation coverage for the following periods:
The continued coverage can be equal to the terminated plan or any form of lesser coverage. COBRA, however, does not allow for an increase in coverage. Related Topics
Why do you think the Federal Government is interested in protecting employee health coverage? How do you feel about additional state regulations in this area? Do you think the list of qualifying events is sufficiently broad to achieve these objectives? Why or why not? Is the time period for benefit protection sufficient? Why or why not?
Marco works for ABC Corp., a large employer in New York state. Marco pays for health coverage for himself and his wife, Julie, under a plan that is sponsored by ABC Corp. After several years of marriage, Marco and Julie decide to divorce. After the divorce, Julie will no longer be an eligible beneficiary on Marco's health plan. What benefits does COBRA offer to Julie? Delete
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A federal law that enables employees and their families to continue health care coverage under an employers group health plan even after they experience an event -- such as a layoff, termination, cut in hours, or divorce -- that would otherwise end their coverage. Employees and their families must pay the full premium, but they get to pay the employer-negotiated group rate, which is often less expensive than an individual rate. This continued coverage lasts for 18 to 36 months, depending on the event that made the employee eligible.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that mandates the right to continuation of health coverage for a worker and his or her family when health benefits are lost. If the worker chooses, group health benefits can be continued under his or her group health plan for a certain period of time. In most cases, businesses that employ 20 or more workers in the year prior are required to offer COBRA when a worker is faced with a situation in which his or her coverage would end. COBRA is typically more expensive than the individual would have paid for coverage as an active employee, and it does not apply to plans related to the federal government or churches.
There are certain qualifying events that would allow a worker to utilize COBRA and continue to receive healthcare. Some qualifying events include reduced work hours, death, voluntary or involuntary loss of a job, divorce, and a job transition. To qualify, the worker would have to be enrolled in the employer’s health plan before the qualifying event occurred, and the health plan would have to be continuing for active employees. What Is important to know about the consolidated omnibus budget reconciliation act?Someone who qualifies for COBRA should understand his or her health care coverage isn’t going to continue exactly as before. There are some differences that should be expected:
The Consolidated Omnibus Budget Reconciliation Act, also known as COBRA, is a federal statute, passed in 1985, that provides employees and their families the right to continue group health benefits under an employers group health plan if their work situation changes. To exercise this right, the employee must have been a member of a qualified group plan. The employee must also have had a qualifying event such as voluntary or involuntary job loss, reduction in hours worked, or a divorce which leads to a loss of coverage. While COBRA requires employers to offer qualifying participants the option to continue their workplace insurance coverage, the employee is responsible for all payments up to 102% of the plan’s premium related to that coverage, including the former employer’s contribution. Nonetheless, because they get to pay the employer-negotiated group rate, contributed coverage under COBRA is often less expensive than coverage an individual would find on the open market. If they so desire, however, former employees can elect to choose other options such as Medicaid or the Health Insurance Marketplace if eligible rather than continue with employee provided health insurance. An employer must notify an eligible employee of their right to continued coverage and that employee has 60 days after they’ve been notified to elect whether to waive COBRA coverage or not. The continued coverage under COBRA lasts for 18 months but may be extended to 36 months under certain circumstances. The purpose of COBRA is to ensure that employees who lose their jobs receive health insurance benefits. COBRA only applies to group health plans offered by private-sector employers with more than 20 employees as well as to state and local governments. COBRA does not apply to the federal government. For more information, see FAQs on COBRA Continuation Health Coverage for Workers. [Last updated in July of 2022 by the Wex Definitions Team] |
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