Continuation of Benefits, often referred to by the acronym COBRA (Consolidated Omnibus Budget Reconciliation Act), is a federal mandate that allows employees and their dependents to continue healthcare coverage under an employer-sponsored plan even after the occurrence of certain qualifying events which would otherwise result in the termination of such coverage.
Qualifying Events for COBRA Coverage
Under COBRA, continuation of benefits is applicable in situations including but not limited to:
- Termination or Reduction of Hours: Voluntary or involuntary termination of employment for reasons other than gross misconduct, or reduction in work hours.
- Death of the Covered Employee: In cases where the employee who held the insurance policy passes away.
- Divorce or Legal Separation: When a covered employee and their spouse legally separate or divorce.
- Dependent Child Status: A covered child losing dependent status under the plan rules.
Duration of COBRA Coverage
The duration of COBRA coverage generally spans:
- 18 Months: For employees who have lost coverage due to termination or reduction of hours.
- 36 Months: For spouses and dependents in cases of the death of the covered employee, divorce, or losing dependent child status.
Calculation and Payment of Premiums
Under COBRA, the beneficiary is responsible for paying the full premium, which can include the cost previously covered by the employer, and an additional 2% for administrative fees.
Special Considerations
- Electing COBRA Coverage: Individuals have a 60-day election period starting from the notice date to opt into COBRA continuation coverage.
- State Law Variations: Individual states can have extensions or modifications to federal COBRA rules, often referred to as “mini-COBRA.”
Historical Context of COBRA
COBRA was enacted in 1985 as part of the Consolidated Omnibus Budget Reconciliation Act to provide a safety net for workers and their families during transitional periods and to mitigate the potential interruption of healthcare services.
Applicability
COBRA applies to all employers with 20 or more employees that maintain group health plans. Small businesses may fall under state continuation coverage laws, if applicable.
Comparisons
COBRA vs. ACA Marketplace Plans: While COBRA allows continuity with the same plan, ACA Marketplace plans can provide alternative coverage options, often with varying costs and benefits.
Related Terms
- HIPAA (Health Insurance Portability and Accountability Act): Legislation that, among other things, ensures the portability of health insurance coverage and protects against discrimination based on health status.
- ERISA (Employee Retirement Income Security Act): Federal law that sets minimum standards for health plans in private industry to provide protection for individuals in these plans.
FAQs
Who is eligible for COBRA coverage?
Can I choose a different health plan under COBRA?
Are COBRA premiums tax-deductible?
References
Summary
COBRA ensures that employees and their families have the right to continue healthcare coverage following significant life events. Although it involves additional costs, this federal provision provides valuable continuity and peace of mind during periods of change.
By understanding the specifics of COBRA, both employees and employers can navigate the complexities of healthcare benefits continuation efficiently and effectively.
