The Consolidated Omnibus Reconciliation Act (COBRA), passed in 1986, helps employees and their families continue their group health insurance coverage after leaving a job. The coverage is temporary, and the employee must often cover the entire cost, but it can help ease the transition when circumstances create a situation where group health coverage might otherwise end.
Qualified Beneficiaries and Qualifying Events
In order to receive COBRA benefits, you must be a qualified beneficiary who has experienced a qualifying event. A qualified beneficiary is a person who is enrolled in a group health plan covered by COBRA the day before a qualifying event occurred. A qualified beneficiary may be:
- A full-time employee
- An employee's spouse
- An employee's former spouse
- Dependent children
Qualifying events depend on the qualified beneficiary. A qualifying event for an employee, spouse or dependent child includes:
- Termination, either voluntary or involuntary, unless for "gross misconduct"
- Reduction in work hours
Qualifying events for spouses and dependent children include:
- A covered employee becoming entitled to Medicare
- A spouse becoming legally separated or divorced from the covered employee
- Death of a covered employee
- A child's loss of dependent status
How COBRA Works
COBRA covers all group plans, including dental, vision and prescription drug plans, but not life insurance or disability benefits plans, offered by employers with at least 20 employees. Employers may be private sector or state and local government agencies. The employee count includes part-time employees, each of which counts as a fraction of an employee, based on the number of hours worked. Individuals with health coverage offered by the federal government or church-affiliated employers are not eligible for COBRA, although federal employees are covered under another law, which is similar.
If you elect COBRA coverage, you may be required to pay the full cost of coverage, which is usually more than you had been paying because employers often subsidize the cost. You may also be required to pay a 2% administrative charge. Even so, COBRA coverage is usually much less expensive then trying to buy individual health coverage on the open market. If you stop paying your premiums, your coverage can be cancelled.
Your health plan should provide written rules for how to obtain COBRA benefits, but in general:
- Your employer must give you a notice describing your COBRA rights if you experience a qualifying event
- Your employer must notify health plan administrators within 30 days in the case of job loss or reduction in number of hours
- You or the affected person must notify the plan within 60 days if the event is divorce, legal separation or loss of dependent status
- You have 60 days from either the date of the qualifying event or the date you received your COBRA election notice, whichever is later, to elect COBRA coverage
Length of coverage depends on the event.
- Benefits last for 18 months in the event you lose your job or your hours are reduced
- Other qualifying events are eligible for three-year coverage
- If your employer stops providing health care coverage it may also cancel your COBRA coverage
- If you become disabled within the first 60 days of COBRA coverage you are eligible for up to an additional 11 months of coverage with appropriate documentation, although you may be charged up to 150% of the premium cost for this extended coverage
If your claim is denied, you must receive written notice, along with a reason for the denial, procedures for appealing, and information on any additional documentation required to support your claim. Note that it is illegal for healthcare plans to discriminate against pregnant employees, so pregnancy alone is not a valid reason to deny a claim. COBRA continuation coverage is not appropriate for everyone, so weigh your options carefully before making a final decision.