COBRA is a Federal Program that gives an employee the ability to maintain group medical coverage if it is lost due to termination, disability, death of the covered employee or other qualifying event.
COBRA statutes apply to businesses with 20 or more employees that offer group health coverage.
It does not matter if the former employer pays for the premium, in whole or in part, for its employees, only that the insurance is available.
For the purposes of COBRA, group medical coverage is defined loosely and includes everything from Preferred Provider policies, HMO coverage, self-funded plans, to any variation of an employer/employee arrangement for medical care.
Several states have additional statues requiring businesses employing fewer than twenty people to comply with COBRA law.
Determination of eligibility depends on the event that caused the loss of benefits.
Eligibility and Qualifying Events Several situations fall into the category of a qualifying event, and they can vary for workers and their qualified dependents.
For employees, the most familiar event is unemployment.
Continuation of coverage is available to former employees who were let go for anything other than gross misconduct, were laid-off due to a reduction in force, had their work hours cut below the required amount to receive health coverage, or quit their job.
Qualified dependents that lose entitlement to benefits due to a covered employee's qualifying event are also entitled for continuity coverage.
Spouses become eligible due to legal separation, divorce, the covered employee becoming eligible for Medicare, or the death of the employee.
A beneficiary's children also become entitled for COBRA coverage if they lose their status as a dependent.
Premiums and Coverage COBRA guidelines stipulate that a qualified former employee must receive benefits that are the same as to those offered to current employees.
Employers may not reduce coverage or modify benefits to those receiving continuity coverage unless the changes affect all those covered under the policy.
Children born or adopted during the coverage period are automatically entitled to the plan, subject to the covered former employee filing the correct forms.
Payment of the insurance premiums is normally paid by the beneficiary and can be up to one hundred and two percent of the full premium payment.
Although rare, some employers include payment of the costs associated with COBRA, all or in part, as part of its benefits package.
Premiums for COBRA are equal to the cost of the prior group insurance plus up to an additional 2% to cover management costs.
The first payment is required to be paid no later than 45 days after acceptance of the COBRA continuation plan with continuing payments due according to the schedule established by the health plan and commonly include a 30-day grace period.
Coverage may be canceled due to non-payment of the premiums.
In February 2009, the United States Congress enacted a subsidy for a 65% reduction in COBRA premiums.
The subsidy is available for up to 9 months for workers that were laid off between September 1, 2008 and December 31, 2009.
If a beneficiary is qualified for the subsidy, they are required to be billed at the reduced rate, and their former employer will be given a payroll tax credit for the remaining premium cost.
The subsidy is subject to eligibility requirements and limitations separate from those of COBRA.
Many websites have posted requirements for the continuation coverage and the reduced premium requirements.
Length of Coverage Normally, former employees are entitled to a maximum of eighteen months of COBRA continuation coverage.
Under certain circumstances, such as another qualifying event during the original coverage period, entitlement can be extended up to a total of 36 months.
If another medical insurance plan becomes available through a new employer that does not impose pre-existing conditions limits or the beneficiary becomes eligible for Medicare, COBRA health insurance is no longer available.
Additionally, if the former employer stops providing company sponsored medical plans or goes out of business, COBRA benefits are no longer available.
Term limits may differ for beneficiaries who the Social Security Administration recognizes as disabled and who meet other criteria.
Notification of Rights and Responsibilities of the Employer Employer's and administrators are required to provide all qualified former employees of COBRA insurance with a COBRA General Notice detailing their rights and the plan provisions within ninety days of eligibility.
At the time of a qualifying event other than divorce, legal separation, or change in dependent status, the employer must notify the insurance provider of the event.
The former employee is responsible for giving notice of the other qualifying events.