Understanding COBRA

COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act of 1986. This act makes it possible for employees and their families to continue their employer sponsored group health plan, after a qualifying event that causes the employee or employee’s dependent to lose coverage. Qualifying events are occurrences that cause an employee or dependent to lose insurance coverage and become entitled to continuation of coverage through COBRA. A qualified COBRA beneficiary is an individual (employee, spouse or dependent) that was covered under the group health plan the day before the qualifying event. A qualified beneficiary also includes a child born to or adopted by a covered employee during the period of COBRA coverage. COBRA applies to employers who employ 20 or more employees. COBRA applies to private sector plans and those sponsored by state and local governments. Church plans are exempt from COBRA.

Plans Covered

COBRA coverage must be offered for any health, dental, prescription drug service, hearing or vision plan, flexible spending account and some Employee Assistance Plans.

Plans Not Covered

COBRA coverage is not required to be offered for plans where the employer does not contribute a premium and has no involvement, such as disability plans, life insurance coverages, or accidental death and dismemberment policies.


Employers are required, by law, to notify each employee about his/her rights to continue COBRA coverage, when the employee spouse and/or dependent(s) first become covered under the group plan. If only the employee is originally covered and the employee later adds a spouse or dependent to the plan, the newly added spouse or dependent must also be advised of their COBRA rights.

The employer has the responsibility to notify the COBRA plan administrator within 30 days of one of the following qualifying events:

Ã?· employee’s death
�· termination of employment (for reasons other than gross misconduct)
�· reduction in hours of employment
�· Medicare entitlement, if a loss of coverage occurs

The employee, covered spouse or dependent is required to notify the COBRA plan administrator, in writing, within 60 days of one of the following qualifying events:

�· divorce
�· legal separation
Ã?· child loses dependent status under the group health plan, beneficiary has 60 days to request COBRA coverage, which begins on the later date of one of the following: date qualified beneficiary loses coverage under the employer’s plan or date election package is postmarked

Once notification of employee’s loss of benefits has been received, COBRA plan administrator has 14 days to send the COBRA election information to the qualifying beneficiary. This election information should include:

�· list of health plans and rates
�· explanation of why and how to complete the form, along with a return by date
�· election form for signature
�· length of time beneficiary will be allowed COBRA coverage, if they elect it

Qualifying Events

Qualifying events are divided into employee, spouse and dependent categories.

Ã?· Employee Qualifying Events – reduction in hours of employment or termination of employment, whether voluntary or involuntary (other than for gross misconduct)

Ã?· Spouse Qualifying Events – death of the covered employee, termination of the covered employee’s employment, reduction in hours of employment of the covered employee, divorce or legal separation from the covered employee, covered employee’s entitlement to Medicare (if it causes a loss of coverage)

Ã?· Dependent Qualifying Events – death of the covered employee, termination of the covered employee’s employment, reduction in hours of employment of the covered employee, divorce or legal separation from the covered employee, covered employee’s entitlement to Medicare (if it causes a loss of coverage), or dependent child ceases to be a ‘dependent child’ under the group health plan.

When Does COBRA Coverage Begin?

The plan coverage is reinstated retroactively to the date of loss of coverage, but will not be reinstated until the beneficiary has paid the first premium. The first premium is due on the day the COBRA election is made. Future COBRA payments must be made on time or the COBRA coverage may be terminated. Plan administrators are not required to send late payment notices or reminders and don’t take responsibility for bills that do not arrive. It is up to the beneficiary to ensure payments are made when due.

How long is COBRA coverage?

COBRA coverage is determined based on the reason for the loss of coverage. The following lists the length of continuation of coverage.

Termination of Employment – 18 months
Reduction of Hours – 18 months
Divorce or Legal Separation – 36 months
Medicare Entitlement of the Employee – 36 months
Death of the Employee – 36 months
Dependent Child no Longer Eligible – 36 months

It is possible that more than one qualifying event may occur. Multiple events can change the length of coverage. If a multiple qualifying event occurs during the original 18 month COBRA period, it is possible that the 18-month period may be extended to 36 months. The following are multiple qualifying events:

�· death of the covered employee
�· divorce or legal separation from the covered employee
�· Medicare entitlement of the covered employee
�· loss of dependent status

Example: During the 18 months of COBRA coverage, triggered by employee’s eligibility for COBRA due to job termination, where both the employee and spouse have elected coverage, they divorce. The spouse may now have 36 months of COBRA in total from the date of the original COBRA qualifying event.

Can COBRA coverage be terminated?

COBRA coverage can be terminated prior to the end of the 18 or 36-month period for the following reasons:

�· employer no longer provides group health coverage to any of its employees
�· premium for the continuation coverage is not paid on time
�· qualified Beneficiary becomes covered under another group health plan, unless the new group health plan contains an exclusion or limitation with respect to any pre-existing condition that the employee, spouse or dependent may have and the pre-existing condition limitation is not reduced under the guidelines of HIPAA
�· qualified Beneficiary becomes entitled to Medicare

What happens to a qualified beneficiary, if it is determined by Social Security Administration that they are disabled?

If the Social Security Administration determines that a qualified beneficiary is disabled during the first 60 days of COBRA coverage, the 18-month continuation period may be extended to 29 months. If this occurs, coverage for all family members who are qualified beneficiaries can be extended to 29 months.

The employee or dependent is responsible for notifying the COBRA plan administrator, within 60 days of receiving the disability determination from Social Security Administration, by sending a copy of the “Notice of Award” letter. This notification must take place within the original 18 month COBRA coverage period.


American law is fluid and subject to revision, change, amendment or elimination. Be sure to read materials provided by your employer and/or COBRA plan administrator, to ensure you understand your rights.

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