COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed in 1986 to provide certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates.
Employer Responsibilities
Most employers with at least 20 employees who sponsor a group health plan are subject to the COBRA provisions. Governmental and church plans that are exempt from ERISA would also be exempt from COBRA. Employers subject to COBRA must comply with the following requirements:
-
Initial COBRA Notice (also known as "General COBRA Notice"): Provides a general overview of the individual’s rights under COBRA. The employer must distribute the Initial Notice to new plan participants (and spouses, if applicable) within 90 days of the coverage start date.
View Model Notice
-
COBRA Election Notice: An employee and covered dependents who experience a qualifying event (see listing below) and a subsequent termination of coverage under the plan should receive a COBRA Election Notice, which explains their right to continue that coverage through COBRA. The Notice should include the coverage termination date, information on how to continue coverage, and payment information. An employer has 30 days to notify the plan administrator of the qualifying event. The plan administrator must then distribute the Election Notice to the covered employee, spouse, and dependents within 14 days of receiving the employer’s notification. If the employer and plan administrator are the same, there is a combined 44 day timeline to distribute the Election Notice.
View Model Notice
-
Notice of Early Termination of COBRA Coverage: Notifies a COBRA participant that their coverage will be terminating earlier than the COBRA maximum period. Employer must distribute "as soon as practicable."
This list is not inclusive of all employer responsibilities under COBRA. For additional information, please see the links below under "Additional Resources."
Qualifying Events and Maximum Length of Coverage
The following chart lists the qualifying events under COBRA. If an individual experiences one of the qualifying events followed by a loss of coverage, that individual would be entitled to the maximum period of coverage indicated.
| Employment termination of employee |
18 months |
| Reduction of employee’s hours |
18 months |
| Divorce or legal separation from employee |
36 months |
| A dependent child ceasing to meet the plan’s eligibility rules |
36 months |
| Employee’s death |
36 months |
| Employee’s entitlement to Medicare |
36 months |
| Employer’s bankruptcy (applies only to retiree coverage) |
For duration of employee’s life |
American Recovery and Reinvestment Act Amendments
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA). This was the initial legislation that amended COBRA. On December 21, 2009, President Obama signed the Department of Defense Appropriations Act, 2010 (DoDAA), into law. On March 2, 2010, the Temporary Extension Act of 2010 (TEA) was signed into law, and on April 15, 2010, the Continuing Extension Act of 2010 was enacted.
As a result of these four legislative changes to COBRA, employees who lose group health plan coverage due to involuntary termination are eligible through May 31, 2010 for a 65% federal subsidy payment toward the cost of their premiums under federal COBRA or under comparable state continuation coverage. Currently, those terminated on or after June 1, 2010 are not eligible for the premium subsidy since the termination must occur between September 1, 2008 and May 31, 2010. The legislative amendments also included a provision which changed the eligibility to receive premium assistance for those who have experienced a reduction in hours followed by a termination of employment. In order to be considered an assistance-eligible individual due to a reduction in hours, an employee must have experienced a reduction in hours between September 1, 2008 and May 31, 2010. However, the termination of employment must have occurred on or after March 2, 2010.
COBRA excludes coverage for those terminated for gross misconduct and certain church plans, so the subsidy program would not apply to these employees. The employee pays 35% of the premium cost under the plan's normal payment procedures. The entity that receives the 35% payment (ex. employer, multiemployer, or insurer) is then entitled to receive the 65% subsidy as either a payroll credit or refund payment.
Eligible employees may receive the subsidy up to fifteen months or until the individual becomes eligible for another group health plan or Medicare.
The DOL has released the following model notices to be used in connection with the COBRA premium assistance available under ARRA:
Additional information is available from the DOL and Internal Revenue Service (IRS):
Click here for a copy of the law
FAQs
How does Medicare affect COBRA coverage?
If an individual is entitled to (i.e., enrolled in) Medicare before electing COBRA, the individual should be offered the maximum period of coverage under COBRA. However, if the individual is entitled to Medicare after electing COBRA, the former employers’ medical plan has the option to terminate the individual’s COBRA coverage, if it is written in the plan’s documents.
Medicare is the primary payer for an individual that is covered by both COBRA and Medicare, regardless of the size of the employer.
COBRA coverage does not extend an individual’s Medicare Part B enrollment period. To avoid higher premium penalties under Medicare, an individual should enroll in Medicare Part B within eight months of their employment termination (or active employee coverage termination, whichever is earlier). However, creditable prescription coverage under COBRA may extend an individual’s enrollment period under Medicare Part D.
Is a disabled employee entitled to additional coverage under COBRA?
If the employee is determined by the Social Security Administration to be disabled during the first 60 days of COBRA coverage (this would include being disabled prior to COBRA coverage), then the employee and his/her covered dependents would be entitled to an additional 11 months of coverage under COBRA, for a maximum coverage period of 29 months.
If an employer reduced an employee’s working hours on January 15, 2010 and as a result the employee lost eligibility for health insurance, is this individual now eligible for COBRA and the subsidy?
The employee should have been offered COBRA upon the loss of eligibility for health coverage due to the reduction in hours on January 15, 2010 and would pay the full cost of coverage for COBRA. A reduction of hours is an existing qualifying event for COBRA coverage that has not been changed by the amendments under ARRA, DoDAA or TEA. Also, unless the employee was involuntarily terminated between March 2, 2010 and March 31, 2010, the employee is not eligible for the subsidy.
Additional Resources
The Department of Labor (DOL) provides the following resources regarding COBRA:
The above links are provided for your information only. NFP does not endorse, nor accept any responsibility for the content, products and/or services provided at non-NFP sites. Some information contained in the NFP site is provided by third parties. We do not independently verify this information, nor do we guarantee its accuracy or completeness. Information provided from governmental agencies is subject to change.