Breaking Down COBRA
Employers need to be aware of the regulations governing COBRA (the Consolidated Omnibus Budget Reconciliation Act). COBRA is a program that amends previous bills related to healthcare and requires group healthcare plans to offer the option of temporary coverage continuation when it otherwise might be terminated. This federally mandated option is for employers with 20 or more employees on 50 percent or more working days during the previous calendar year. Here's a closer look at some FAQs related to COBRA and additional resources that employers can consult.
What is COBRA?
COBRA requires continuation coverage to be offered to covered employees, their spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain specific events. COBRA continuation coverage is often more expensive than the amount that active employees are required to pay for group health coverage, since the employer usually pays part of the cost of employees' coverage and all of that cost can be charged to individuals receiving continuation coverage.
What Health Plans and Businesses Are Subject to Cobra?
COBRA laws generally apply to group health plans offered by private employers with 20 or more employees, on more than 50 percent of typical business days in the previous year. Full-time and part-time employees count when determining whether a plan is subject to COBRA. In complex situations, it's a wise investment to consult an expert to determine if you're subject to COBRA. Plans offered by state and local governments are also subject to COBRA; however, plans offered by the Federal government and churches typically are not. Many states also have specific regulations similar to COBRA, so it's important to understand those regulations as well.
What Group Plans Count?
The law defines a group plan as "any arrangement that an employer establishes or maintains to provide employees or their families with medical care, whether it is provided through insurance, by a health maintenance organization, out of the employer's assets, or through any other means."
What is a Qualifying Event?
COBRA regulations apply only in the case of a qualifying event. According to the Department of Labor, qualifying events may include:
- The death of a covered employee
- Termination or reduction in the hours of a covered employee's employment for reasons other than gross misconduct
- A covered employee becoming entitled to Medicare
- Divorce or legal separation of a covered employee and spouse
- A child's loss of dependent status (and therefore coverage) under the plan
Who is Eligible for COBRA Coverage?
Qualifying beneficiaries for COBRA coverage typically involve anyone that was covered by the health group plan on the day prior to the qualifying event. These may include the employee, a spouse or former spouse, and dependent children. There are additional nuances in cases where employers go bankrupt, so it's important to consult a professional to determine who is a qualifying beneficiary under your plan.
Notices and Election Procedures
COBRA has a detailed and specific process that must be followed, including what notices must be given, what the election process looks like, and more. For detailed information on this topic, please consult An Employer's Guide to Group Health Continuation Coverage Under COBRA.
Other Important Details About COBRA COBRA coverage typically ranges from 18 – 36 months, but may be less than that. The determination of coverage is made based on a range of factors, including reasons for termination. It's important to consult an expert to understand your obligations under the law. Employees and beneficiaries may be required to cover the entire cost of COBRA, although some plans choose to cover all or some of those expenses. Each situation is individual, and it's important to choose an approach that's right for your business.