COBRA offers an option for employees and their beneficiaries to continue to receive benefits through an employer’s group health insurance plan for a temporary period of time following an event that would otherwise end coverage. While this usually applies to employers with 20 or more employees, some states also offer a form of “mini-COBRA.”
Generally, COBRA benefits allow employees and their spouses to continue receiving benefits under a group health insurance coverage plan for 18 to 36 months following a qualifying event.
COBRA Overview
The Consolidated Omnibus Budget Reconciliation Act or “COBRA” is a federal law that allows employees and their beneficiaries to, in some circumstances, continue to receive health coverage under an employer’s plan for up to 18 months. In some cases, the covered employee’s spouse and dependents can continue to receive coverage through COBRA for up to 36 months.
To receive continued benefits under COBRA, the covered employee must be covered by an eligible employer plan at the time that a qualifying event occurs. A qualifying event is one that allows employees, and their spouses and dependents, to receive coverage under COBRA when an event occurs that would otherwise terminate the coverage. The applicability of COBRA and the amount of time for eligible COBRA coverage depends upon the circumstances.
Qualifying Events
Under COBRA, the starting point is the qualifying event. This can include termination, reduction in hours, death of the employee or divorce.
For covered employees, the following are considered qualifying events for COBRA purposes:
- The employee quits;
- The employee is fired for reasons that do not include gross misconduct;
- The employee is laid off; or
- The hours of the employee are reduced such that they no longer receive coverage whereas they previously did before the cut in hours.
- An employee’s spouse and dependents can continue to receive coverage under COBRA if any of the above events occur.
Additionally, for employee’s spouses and dependents a qualifying event under COBRA also includes the following:
- Death of the covered employee;
- Divorce or legal separation between the employee and spouse;
- A dependent losing coverage through the employee’s group health insurance plan, which occurs primarily through age such as when a child turns 26 years old; and
- The covered employee becomes eligible for coverage through Medicare.
Cost of Receiving Insurance Benefits Under COBRA
COBRA benefits are charged at the full price of insurance for anyone that continues to receive coverage after the qualifying event. While the employee’s current or former employer will no longer subsidize some of the costs, typically they receive insurance at a negotiated discounted rate that is cheaper than comparable insurance that could be obtained through the private health insurance marketplace.
There will also be a 2% administrative cost added to the full cost of the premium. This will be a greater cost than what the covered employee was previously paying for health insurance while covered by the employer and not through continued benefits with COBRA.
How Long You Can Continue Receiving COBRA Benefits
Determining how long coverage under COBRA may occur will depend on the qualifying event or events in circumstances involving beneficiaries such as a spouse or dependents.
18 months of COBRA Benefits Continued Coverage Eligibility
When the covered employee is terminated, quits, or has a reduction in hours, then COBRA benefits generally last for 18 months.
36 months of COBRA Benefits Continued Coverage Eligibility
However, if the qualifying event is that the employee died, they separated from their spouse, or the dependent lost coverage under the plan, then the beneficiaries are covered for 36 months. If one of the latter events occurs after an event that would only allow for 18 months of eligible coverage, but during the time in which the beneficiaries are still receiving coverage through COBRA, then their COBRA benefits will last for 36 months.
Disability and Beneficiaries
Additionally, beneficiaries may have their eligibility for COBRA coverage extended past 18 months and up to 29 months if one of the following occurs:
- The beneficiary is disabled; or
- The beneficiary becomes disabled within 60 days of their coverage under COBRA.
If relying on this last timeframe for determining the length of coverage, additional requirements will also need to be satisfied.
Additional Events that May End COBRA Benefits
In most cases, the employer will notify the health insurance company about your potential eligibility for continued coverage through COBRA within 30 days.
Generally, you will then need to notify the intent to continue receiving benefits through COBRA within 60 days following the qualifying event. However, in cases in which there is a spouse and/or dependents that are beneficiaries of the applicable group health insurance plan at the time the qualifying event occurs, not all family members need to continue to receive this coverage.
Additionally, COBRA benefits can be discontinued prior to the end of the eligibility period if the employee or beneficiaries choose. In other words, each person is not locked into the full length of the period of time for which they may be eligible to receive COBRA benefits.
Other events that may end COBRA benefits early may include:
- The employer or former employer goes out of business or undergoes bankruptcy;
- The employer or former employer no longer offers eligible group health coverage to any of its employees;
- The eligible coverage period ends;
- Premium payments are no longer made; and
- The covered employee becomes eligible for Medicare.
Additionally, if the employer or former employer changes the type of plan that it offers to its employees, then COBRA benefits can last for the applicable eligibility period but will be under this new plan instead.
Conclusion
Determining your eligibility and the length of coverage you may receive under COBRA is complicated. It is also only one piece of the equation. There are other options that you may wish to consider instead of pursuing continuing benefits through COBRA depending upon your circumstances.
If you have questions or need clarification on your eligibility for continued benefits through COBRA, fill out our contact form. An attorney will review your information and will contact you to discuss further your individual circumstances and how we can help.
