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COBRA Insurance Law

COBRA Health Coverage Continuation Law

COBRA Insurance Law

The COBRA insurance law was passed in 1986 as part of a larger piece of legislation known as the Consolidated Omnibus Budget Reconciliation Act. This legislation created what we now know as COBRA continuation coverage, which allows individuals and qualifying beneficiaries (spouses and children) to maintain their group health insurance plan after losing, quitting, or retiring from their job. The law was passed as a protection or safety net for people so that they didn't suddenly find themselves without health insurance and crippled with expensive medical bills. Additionally it was meant to help people in the short term while they looked for another job or alternate health insurance.

Summary of the COBRA Law

Essentially the COBRA law stipulates both who is eligible for COBRA insurance as well as how much it costs and how long it lasts for. Additionally the law lays out responsibilities for employers and penalties when employers fail to comply. Finally it explains the deadlines and time limits for COBRA enrollment.

COBRA Eligibility Under the Law

The COBRA law sets out three areas for eligibility for COBRA known as qualifying plan, qualifying event, and qualifying beneficiary. A qualifying plan is almost any insurance plan that is still active and covers at least 20 full time employees or their part time equivalents. A qualifying event, or how insurance was lost, can be ay of the following things:

  • Involuntary or voluntary termination of the covered employee's employment for any reason other than gross misconduct
  • Covered employee has reduced hours of work
  • Covered employee becoming eligible to enroll in Medicare
  • Legal separation or divorce of a covered employee
  • Death of the covered employee
  • Loss of status as a dependent child under health plan rules

Finally a qualifying beneficiary refers to who is allowed to enroll in COBRA continuation coverage and normally extends to the spouse and any dependent children.

Length of COBRA Continuation Coverage

The COBRA law also outlines how long COBRA coverage will last for different beneficiaries and for different qualifying events. The basic term lengths are:

  • When the employee, spouse, and/or dependent child enrolls in COBRA due to termination or reduced hours, the normal term length is 18 months
  • When the spouse and/or dependent child enrolls in COBRA due to Medicare entitlement, divorce, legal separation, or death of the employee COBRA can be used for up to 36 months
  • When a child loses their status as a "dependent child" – COBRA can be used for 36 months

Notifications Under the COBRA Law

There are many notifications, deadlines, and timelines created by the law that must be followed by both the parties seeking COBRA coverage and the employer. These include:

  • A primary notice must be given to the employee and spouse when the plan starts informing them of their rights to COBRA.
  • When a qualifying event occurs, the plan administrator must notify any qualified beneficiaries of their right to enroll in coverage.
  • There are 60 days from the date of the COBRA election notice to enroll in coverage.
  • The employee/spouse/child must inform the plan administrator of legal separation, divorce, disability, or loss of dependent status when it occurs to be eligible for COBRA.
  • Employers must let the plan administrator know any time there is a qualifying event including death, termination, reduced house, or Medicare eligibility.
  • Employees must inform the plan administrator if their marital status changes in any way, including legal separation.

Payments for COBRA Under the Law

The law also states very clear rules regarding the cost of COBRA insurance at the federal level. The first is that the full premium must be paid plus a 2% administration fee in order to use COBRA. Coverage can be lost if payments are not made on time. Additionally, premiums may increase over time if the group health insurance plan becomes more expensive. Finally, individuals using COBRA will be responsible for paying any copayments, deductibles, and other expenses that are part of the group health insurance plan.

Interested in reading the full text of the law? You can find in on the U.S. Department of Labor website.

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