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 employees who lose or leave their jobs or by their dependents.

For example, if an employee is a member of an employer-sponsored group health care plan and he is laid off due to business restructuring, the employee must be allowed to retain his health care coverage for 18 months by paying his portion and his employer's portion of the premium.

Another example is that if an employee and his spouse are covered by an employer-sponsored group health care plan and they get a divorce, the spouse must be allowed to keep her coverage for up to 36 months by paying the premiums. COBRA provisions apply to pregnant employees who lose their jobs in the same way that they apply to other employees. So, if a pregnant employee is a member of the employer-sponsored group health care plan and she is fired for unexplained absences, she must be allowed to keep her health insurance for 18 months by paying the premiums.

Compliance Requirements

COBRA health care provisions generally apply to employers with 20 or more employees. They apply to private employers and state and municipal 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 of the plan. In other words, a two percent administration fee may be charged in addition to 100 percent of the cost of the plan.

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

Pregnant Employees

An amendment to Title VII of the Civil Rights Act of 1964, known as the Pregnancy Discrimination Act of 1978 (PDA), makes it unlawful for an employer to discriminate against employees on the basis of pregnancy, childbirth, or related medical conditions. Employers cannot discriminate against pregnant employees in their health care plans. If a pregnant employee is terminated for any reason other than "gross misconduct," the employer is required to provide the pregnant employee with the same COBRA benefits that it provides for other terminated employees.

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.

Questions for Your Attorney

  • If an employer has less than 20 employees, does the employer have to provide COBRA health insurance benefits to terminated employees?
  • If I have been terminated from my job due to business reorganization, does my employer have to provide me with COBRA benefits?
  • Can my employer refuse to provide COBRA benefits to pregnant employees who lose their jobs?

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