Federal COBRA-Consolidated Omnibus Budget Reconciliation Act.
COBRA stands for The Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA covers employees and their insured dependents of employers with at least twenty full- and part-time workers.
COBRA qualifying events are:
- A voluntary or involuntary employment termination, except for termination for gross misconduct
- Reduction of covered employees’ hours causing a loss of coverage
- A dependent child of the covered employee ceases to be dependent under the terms of the plan.
- A covered employee’s death
- A covered employee’s divorce or legal separation (actual entry by the court of a divorce decree or legal separation order)
- A covered employee becomes entitled to (covered under) Medicare.
- Filing of a Chapter 11 bankruptcy petition by the employer (only applicable to retired employees and their dependents covered under a retiree medical program)
COBRA includes medical, dental, vision, and FSA plans.
Be careful; if you have an HRA, you will need to continue the benefits to the COBRA beneficiary. A good rule is that you must treat the COBRA beneficiary just like an active employee.
The maximum period of COBRA coverage following a qualifying event of a covered employee’s termination of employment or reduction in hours is 18 months. However, when certain events constitute qualifying events that trigger COBRA rights, the maximum COBRA coverage period is 36 months. Qualifying events for which the maximum COBRA coverage period is 36 months are:
- Death of a covered employee
- Divorce or legal separation of a covered employee from a spouse
- A covered employee becomes entitled to (covered under) Medicare.
- A dependent child ceases to be a dependent child of a covered employee under the applicable requirements of the plan.
You and each qualified family member are entitled to make a separate decision to continue coverage. Each member of your family group is listed as a “qualified beneficiary” on the COBRA Election form. On the form, you can elect which benefits you want to maintain for each person or decline coverage in its entirety for specific family members.
Administration
The employer or the COBRA administrator has 14 days after termination to send the employee and/or dependent a COBRA packet. The COBRA beneficiary must complete an enrollment form within the specified period (generally 60 days) and pay the first insurance premium to have the coverage reinstated.
COBRA coverage always begins the day after your standard coverage ends, with no exceptions. In most cases, employer-sponsored coverage ends on the last day of the final month of your employment, meaning COBRA begins the first day of the following month. COBRA does not permit gaps in your insurance coverage.
COST
The insured must pay the entire premium cost and, in most cases, a 2% administration fee. The cost in the first 18 months can be 102% of the total plan premium. For months 19 through 29, it can be at most 150% of the premium.
Marsha Marrullier, REBC
Sr. Employee Benefits Advisor
Corporate Benefits Network, Inc.
(727) 381-9288