What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), is a federal law that requires employers offering health care benefits to offer the option of continuing such coverage to qualified beneficiaries – at their own expense – who would otherwise lose their benefits due to employment termination, reduction in hours, or certain other events.
COBRA legislation allows employees and their dependents who were covered under an employer’s group health plan to continue their health coverage in situations when it would ordinarily be lost, such as a layoff or reduction in the number of hours worked.
COBRA legislation applies to all employers’ group health plans, with the exception of small employers with less than 20 employees.
COBRA Frequently Asked Questions
Qualifying events for COBRA coverage include:
- An employee’s voluntary or involuntary termination of employment, unless it is for gross misconduct. While COBRA does not define misconduct, criteria to use if an employer is contemplating denying COBRA benefits due to misconduct are:
- There must be a connection between the offense and the employee’s job.
- The employee must be able to understand the gravity of the misconduct.
- The offense must be willful.
- An employee’s reduction in employment hours (for example, from full time to part time)
- A covered spouse’s divorce or legal separation from an employee
- An employee’s death
- An employee’s entitlement to Medicare
- A covered dependent’s change in status (for example, reaching an age that no longer qualifies the dependent for coverage under the parent’s health plan)
- Active military duty when health coverage is not voluntarily maintained
- Failure to return to work at the end of family and medical leave where coverage was in effect at the beginning of the leave but was lost during the leave
- An employer’s bankruptcy
When an individual chooses to take COBRA coverage, he or she has 45 days to make the first payment. (The employee generally pays the full cost of COBRA insurance premiums.) Federal law states that COBRA coverage can be terminated if premium payments are late. Payment is considered timely if it is made within 30 days after the due date or within a longer period set out under the plan.
A qualified beneficiary is anyone covered under an employer’s group health plan on the day before an event that causes loss of coverage, including:
- Full- and part-time employees
- Their spouses and dependents
- Retirees (unless eligible for Medicare)
- Partners in a partnership
COBRA is effective one day after your benefits termination date, pending the receipt of a timely election and payment. You must elect COBRA coverage within 60 days from the date of your letter or the Benefits Termination Date whichever is later, and make your first payment within 45 days from the election postmark before coverage will be active.
Full premium payments must be post marked by the U.S. Postal Service on or before the latest post mark date and received by ConnectYourCare. Premium payments may also be paid online through COBRApoint by 11:59pm Central standard time on the latest post mark date to be accepted. Please note, payments made online before 11:59pm CST will be processed the same day any payments made online after 11:59pm CST will not be processed until the next business day.
- Employers must notify covered employees and covered spouses of their initial rights under COBRA when they first join the plan.
- Employers must notify covered persons of their election rights to continue coverage after a qualifying event takes place.
- Employers have 30 days to notify the plan administrator (typically the insurance company) when a qualifying event occurs.
- In the event of divorce or change of status by a dependent, employers have 60 days. Once notified, the administrator has 14 days to notify the individual entitled to COBRA coverage.