COBRA

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) is a federal law that allows an insured employee and their dependents to continue health insurance coverage under their employer's group health plan for up to 18 months, or 36 months for dependents in certain circumstances, such as voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events.

COBRA Health Insurance

COBRA health insurance is not free and the former employee must pay the full premium (including the share previously paid on their behalf by their employer) plus a 2% administrative fee. Therefore, continuation of coverage under COBRA can be more expensive than if you obtained your own individual health insurance plan.

In order to qualify for COBRA benefits, three requirements must be met:

1. The group health plan must be a qualifying plan;

2. An individual must be a qualifying beneficiary; and

3. A qualifying event must occur.

Qualifying Plans

COBRA applies to group health plans for employers with 20 or more employees (part-time employees are included in the calculation of the total employees, based on their fraction of full-time hours worked).

Qualifying Beneficiaries

A qualifying 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.
• The employee's dependent child.
• Any child born to or placed for adoption with a covered employee during the period of COBRA coverage.
• An agent, independent contractor, or director who participates in the group health plan.
• In certain cases, a retired employee, the retired employee's spouse, and the retired employee's dependent children may be qualifying beneficiaries.

Qualifying Events

Qualifying events differ depending on who the qualifying beneficiary is:

Qualifying Events for Employees:

• Voluntary or involuntary termination of employment for reasons other than gross misconduct.
• Reduction in the number of hours of employment.

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.
• The covered employee becomes 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.
• The covered employee becomes entitled to Medicare.
• Divorce or legal separation of the covered employee.
• Death of the covered employee.

For more information, visit the Department of Labor.

July 31, 2010

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