Understanding COBRA

The Consolidated Omnibus Reconciliation Act (COBRA) is a federal law that requires employers with 20 or more employees to offer continuing coverage to individuals who might otherwise lose their health benefits due to a qualifying event.  Some states have similar laws for smaller groups.  These qualifying events that could trigger COBRA are:

• An employee’s termination of employment, unless for reasons of gross misconduct
• An employee’s reduction in hours of employment
• A strike or walkout
• The company’s bankruptcy

In the situations above, the employee and any covered dependents are entitled to 18 months of continued coverage through COBRA.

Additionally, the spouse and/or children of a qualified employee are entitled to 36 months of coverage as a result of:

• Death of the covered employee
• Divorce or legal separation
• The employee becoming eligible for Medicare benefits
• A dependent child ceasing to be eligible under the employee’s medical plan

Once a qualifying event occurs, the employer is required to send the employee a notice within 14 days informing them of their eligibility.  Normally, the employee has 60 days to accept coverage which can carry a premium of 102% of the group premium (the extra 2% is an optional administrative fee the employer may include).   The coverage under COBRA would be the same coverage the employee had on the group plan.

My Benefit Advisor (MBA) guides employers of all sizes through planning, communicating, and managing a successful employee benefits program.  We are ready to help you find the solution that fits your needs, from group insurance to individual coverage.  For more information about MBA, contact us.