COBRA Coverage

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In 1986, Congress passed health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA). These provisions ensure that group health care coverage that might otherwise have been inflexibly terminated may be retained by workers who lose or leave their jobs or by their dependents.

Scope

COBRA health care provisions generally apply to employers with 20 or more employees. They apply to both private and public employers. They do not, however, apply to the federal government or to church-related organizations. COBRA's health care provisions apply to group health care insurance plans, including plans for dental, vision, or prescription drugs. They do not apply to life insurance policies.

Coverage

The COBRA health care provisions generally allow employees or their qualifying dependents to temporarily retain their group health care coverage if that coverage would otherwise be lost due to one of several "qualifying events." To retain this coverage after such an event occurs, the employee or the dependent must pay for the coverage, including the portion of the premium that was previously paid by the employer. COBRA participants may not be required to pay more than 102 percent of the cost to the plan. In other words, a two percent administration fee may be charged.

Employees may choose to temporarily retain their group health care coverage after one of the following qualifying events:

• Voluntary or involuntary termination (Except for "gross misconduct")
• Reduction in the number of hours of employment

Spouses of employees who have been covered by the employee's health care plan may choose to temporarily retain their group health care coverage after one of the following qualifying events:

• Voluntary or involuntary termination of employee (Except for "gross misconduct")
• Reduction in the number of hours of employee
• Divorce or legal separation from employee
• Death of employee
• Employee becoming eligible for Medicare

Children of an employee may choose to temporarily retain their group health care coverage after one of the following qualifying events:

• Voluntary or involuntary termination of employee (Except for "gross misconduct")
• Reduction in the number of hours of employee
• Divorce or legal separation from employee by parent of child
• Death of employee
• Employee becoming eligible for Medicare
• Loss of "dependent child" status

Length of Coverage

When employees lose their jobs or have their hours reduced, employees and their dependents may purchase COBRA coverage for an 18-month period. In the case of all other qualifying events, dependents may purchase the coverage for a three-year period. COBRA coverage may be terminated for nonpayment of premiums or if the employer stops offering health care coverage.

Notice and Election Period

Employers must give their employees or their dependents notice of their eligibility for COBRA in the event that a qualifying event occurs. Persons generally have 60 days from the date of a qualifying event to elect COBRA coverage. If during that 60-day period, the person waives his or her right to coverage, that waiver may be revoked, so long as the 60-day election period has not yet expired.

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