Health insurance is one of the most important employee benefits that employers provide. The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a Federal law that requires that group health plans offer continuation coverage to covered employees, former employees, spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain specific events. In California, there is a corresponding state law that is referred to as Cal-COBRA. Under federal law an employer must normally employ more than 20 employees (both full-time and part-time employees count) to be subject to COBRA requirements. Pursuant to Cal-COBRA, if the employer has an insured plan, as few as two employees will trigger obligations to continue medical benefits.
At a Glance
At a Glance
COBRA allows the employee and his/her family can retain their group health coverage by paying group rates for a maximum period that ranges from 18 – 36 months as long as the employer continues to offer a group health plan. The COBRA premium may be higher than what the individual was paying while employed, but generally the cost is lower than that for private, individual health insurance coverage.
COBRA sets rules for how and when continuation coverage must be offered and provided, how employees and their families may elect continuation coverage, and what circumstances justify terminating continuation coverage.
Click on the following for more information:
- Does COBRA apply to all Employer Health Plans?
- When must COBRA be offered?
- How are employees notified of their COBRA rights?
- How does the Employees Elect COBRA Coverage?
- Additional resources
Does COBRA Apply to all Employer Health Plans?
No, COBRA does not apply to all employer health plans. COBRA generally applies to all private-sector group health plans maintained by employers that have at least 20 employees on more than 50 % of its typical business days in the previous calendar year. Employers may require individuals to pay for COBRA continuation coverage. But the premium that is charged cannot exceed the full cost of the coverage, plus a 2 % administration charge.
Both full- and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of a full-time employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full time.
A group health plan is 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. "Medical care" includes:
- Inpatient and outpatient hospital care;
- Physician care;
- Surgery and other major medical benefits;
- Prescription drugs;
- Dental and vision care.
Note: Life insurance is not considered "medical care," nor are disability benefits; and COBRA does not cover plans that provide only life insurance or disability benefits.
Carrying out the requirements of COBRA is the direct responsibility of the plan administrator. Your group health plan may be administered by the employer or by a professional benefits administration firm. Your plan administrator is usually documented in your plan documents. See the section below for an overview of what is required of the plan administrator.
When Must COBRA be Offered?
Generally speaking, COBRA continuation coverage must be offered to qualified beneficiaries after a qualifying event has occurred. These events include the death of a covered employee, divorce or legal separation of a covered employee and spouse, or the termination or reduction in the hours of a covered employee's employment for reasons other than gross misconduct. COBRA also applies when a covered employee becomes entitled to Medicare, and when the child dependent of a covered employee is no longer eligible due to age.
Employers must notify their plan administrators within 30 days after an employee's termination or after a reduction in hours that causes an employee to lose health benefits.
The plan administrator must provide notice to individual employees of their right to elect COBRA coverage within 14 days after the administrator has received notice from the employer.
For specific information please go to the California Department of Managed Healthcare
How are Employees Notified?
The plan administrator must provide covered employees and their families with specific notices explaining their COBRA rights. They must also have rules for how COBRA continuation coverage is offered, how qualified beneficiaries may elect continuation coverage, and when it can be terminated. Here are just a few of the documents that must be maintained and distributed to employees under COBRA:
- The Summary Plan Description
- COBRA General Notice
- COBRA Qualifying Event Notice
- COBRA Election Notice
- COBRA Notice of Unavailability of Continuation Coverage
- COBRA Notice of Early Termination of Continuation of Coverage
Click here for a more complete list and specific information
How does the Employee Elect COBRA Coverage?
When an employee’s hours are reduced or terminated, they will receive a COBRA Election Notice from the plan administrator. The employee and/or the beneficiaries must respond and elect COBRA coverage by the 60th day after that Notice was sent or the day healthcare coverage ceased, whichever is later.
When other qualifying events occur such as divorce, employees must notify the plan administrator within 60 days of the qualifying event. A COBRA Election Notice will be sent to the beneficiaries no later than 14 days after the plan administrator receives that information from the employee. The beneficiaries then have 60 days to decide whether to elect COBRA continuation coverage.
For more detailed information about go to:
[i] US Department of Labor. (n.d.). Employee benefits security administration publications and reports. Retrieved from http://www.dol.gov/ebsa/publications/