Consolidated Omnibus Budget Reconciliation Act (COBRA)

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires most employers with group health plans to offer employees the opportunity to continue temporarily their group health care coverage under their employer's plan if their coverage otherwise would cease due to termination, layoff, or other change in employment status (referred to as "qualifying events").

What is a qualifying event?

The qualifying event requirement is satisfied if the event is (1) the death of a covered employee; (2) the termination (other than by reason of the employee's gross misconduct), or a reduction of hours, of a covered employee's employment; (3) the divorce or legal separation of a covered employee from the employee's spouse; (4) a covered employee becoming entitled to Medicare benefits under Title XVIII of the Social Security Act; or (5) a dependent child ceasing to be a dependent child of the covered employee under the generally applicable requirements of the plan and a loss of coverage occurs.

Does a qualifying event result from a voluntary termination of employment?

Yes. Apart from gross misconduct, the facts surrounding a termination or reduction of hours are irrelevant. It does not matter whether the employee voluntarily terminated or was discharged.

What Specific Events can be Qualifying Events?

The statute specifies six triggering events that, if they result in a loss of coverage, can be qualifying events:

Death of the covered employee;

Voluntary or involuntary termination of the covered employee's employment other than by reason of gross misconduct (note that a retirement is considered a termination of employment);

Reduction in hours of the covered employee's employment;

Divorce or legal separation of the covered employee from the employee's spouse;

Dependent child ceasing to be a dependent child under the generally applicable requirements of the plan; and

An employer's bankruptcy, but only with respect to health coverage for retirees and their families.

How long do I have to notify an employee?

Once the administrator is notified of a qualifying event, they have 14 days to notify the beneficiary of their COBRA rights.

What amount do I charge them?

The rate is 102% (except for the 11-month disability extension, which is 150% if the disabled beneficiary is part of the coverage group).

How does the Payment Plan regarding COBRA coverage work?

A plan may not require any payment until 45 days after the qualified beneficiary's initial election. If a qualified beneficiary fails to make the initial premium payment within the 45-day period, the plan administrator may terminate the COBRA coverage. Thereafter, payments are due on the first of each month, subject to a 30-day grace period.

When is their premium due?

Initial premium is due 45 days after the beneficiary makes their COBRA election. Subsequent premiums are paid monthly with at least a 30-day grace period.

Do I terminate them first, then reinstate?

Yes, you terminate the employee immediately because they will no longer be an active employee. When COBRA is elected, the employee should fill out a new enrollment form indicating the COBRA effective date. Submit the COBRA enrollment form with the COBRA suffix to Blue Cross.

What if they don't pay, or pay late?

By law, COBRA should end if payment is not made within the grace period.

What Plans Are Subject to COBRA?

Virtually all group health plans maintained by employers for their employees are subject to COBRA's provisions, include group health plans of corporations, partnerships, tax exempt organizations, state and local governments. This also includes Health Care Spending Accounts.

Who will notify the COBRA participants when their COBRA coverage ends?

The employer is responsible for the notification of terminating COBRA coverage.