A quick and easy overview of COBRA benefits

The Consolidated Omnibus Budget Reconciliation Act has a deceivingly cool acronym: COBRA. Here is a quick overview of COBRA history, purpose, and rules.

COBRA has been around since 1986
The COBRA law passed so people who lost their employer Group Health Plan could extend their coverage for a limited amount of time.

Not all employers are required to offer COBRA
Only employers with 20 or more employees must offer COBRA.

COBRA coverage is extended to dependents as well as employees
People eligible for or currently on COBRA are called Qualified Beneficiaries (QBs). If an employee has dependents on their Group Health Plan, then the employee and each of their dependents are considered a QB.

Employers must offer COBRA continuation for specific situations called Qualifying Events
Employers must offer COBRA continuation for the following Qualifying Events:

  • Termination When an employee quits their job or is fired for reasons other than gross misconduct.
  • Loss of hours When an employee’s hours are reduced and they are no longer eligible for their Group Health Plan.
  • Medicare When an employee switches from their Group Health Plan to Medicare, their dependents enrolled on their Group Health Plan must be offered COBRA.
  • Divorce When an employee removes a spouse from their Group Health Plan due to divorce, the spouse must be offered COBRA.
  • Death When an employee passes away, their dependents enrolled in their Group Health Plan must be offered COBRA.
  • Aging out When covered dependent children turn 26, they must be removed from the Group Health Plan and offered COBRA .

COBRA participants must be included in Open Enrollment
QBs must be sent the same Open Enrollment materials active participants are given. This gives QBs the opportunity to change plans, add dependents, and add coverage (for example: dental coverage).

COBRA is temporary
The Qualifying Events are associated with different coverage timeframes:

  • Termination 18 months
  • Loss of hours 18 months
  • Medicare 36 months
  • Divorce 36 months
  • Death 36 months
  • Aging out 36 months

COBRA premiums are the full premiums plus an administration fee
COBRA premiums include the employee and employer portions of insurance premiums. This means QBs pay both their monthly premium plus whatever their employer’s portion was and an administrative fee. The administrative fee is usually an additional 2%.

QBs do not have to elect COBRA
COBRA is not mandatory. It is there in case QBs need insurance between the time they lose their Group Health Plan and before they find a new insurance plan.

QBs can cancel COBRA at any time
COBRA is designed for temporary purposes which is why COBRA coverage can be cancelled without penalty.

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