The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, is a federal law that requires employers to offer employees, their spouses, and their dependents continued health insurance after a qualifying life event that would normally cause them to lose coverage. Oftentimes, this is after an employee resigns, is terminated for reasons other than gross misconduct, or has a reduction of hours which makes them ineligible for health insurance.
COBRA coverage typically lasts for 18 months after the qualifying life event, or until COBRA recipients qualify for a new health insurance plan. If the individual loses health insurance for reasons such as loss of dependent status, divorce, death of the primary policy holder, or the primary policy holder’s qualification for medicare, then coverage may extend until 36 months after the life event.
Under COBRA, beneficiaries receive the same health insurance benefits they had prior to losing coverage, but they pay the full premium each month. The cost of the full premium at the employer’s discounted rate is often much cheaper than paying for an individual plan at the market rate.
Who Qualifies for COBRA?
Companies with 20 or more employees for at least 50% of their business days are required to offer and provide COBRA health insurance to eligible employees and their beneficiaries.
Employees qualify for COBRA if they experience one of the following life events:
- They voluntarily resigned from the company.
- They were terminated for reasons other than gross misconduct.*
- Their hours were voluntarily or involuntarily reduced.
*Employees who are terminated for gross misconduct do not qualify for COBRA. This includes behavior that is grounds for immediate dismissal like stealing, illegal drug use, intoxication while on the job, and sexual harassment.
Family members may also qualify for COBRA health insurance if they experience one of the following qualifying life events:
- Their spouse or parent became ineligible for health insurance for one of the above reasons.
- They turned 26 years old, causing them to lose their dependent status.
- They divorced the primary policy holder.
- The primary policy holder died.
- The primary policy holder qualified for medicare.
Individuals, their spouses, and their dependents must have been enrolled in the company’s health insurance plan prior to losing coverage in order to qualify for COBRA.
What Are Employers' COBRA Obligations?
Employers must provide employees with the following information in order to be COBRA compliant:
- COBRA general notice: Within 90 days of an employee, spouse, or dependent becoming eligible for the company’s group plan, the company must provide them with information explaining what COBRA is, and how they may qualify for COBRA in the future. This is typically provided along with the Summary Plan description that explains what the group health care plan covers and how it works.
- COBRA election notice: When an employee, their spouse, or dependents lose health care coverage, the employer’s plan administrator must send out a COBRA election notice within 14 days. If an employer does not use an outside administrator, they have 44 days to send the election notice.
The COBRA election notice must:
- Indicate the amount of the monthly premium payment.
- State where to send the premium payment.
- Specify when coverage starts and ends.
- Include other COBRA terms and eligibility.
- Be written in clear language.
To continue to receive health insurance under COBRA, qualified individuals must opt into the plan within 60 days of receiving notice. After notifying companies of their plan to continue coverage, they have 45 days to pay the initial premium.
What Can You Do if You Weren’t Offered COBRA?
Employers are required by law to notify employees and their spouses and children of their COBRA eligibility. When companies fail to provide eligible beneficiaries with COBRA’s terms, eligibility, and payment information, employees or their families may be able to file a lawsuit.
Our employment class action attorneys can help you determine if you may have a COBRA case. Every day they help workers stand up to corporations when they violate federal or state employment laws. Contact us today for a free, no-obligation legal review.