FAQs About COBRA
Continuation Health Coverage
What is COBRA continuation health coverage?
Congress passed the landmark Consolidated Omnibus
Budget Reconciliation Act (COBRA) health benefit provisions in 1986. The law
amends the Employee Retirement Income Security Act, the Internal Revenue
Code and the Public Health Service Act to provide continuation of group
health coverage that otherwise might be terminated.
What does COBRA do?
COBRA provides certain former
employees, retirees, spouses, former spouses, and dependent children the
right to temporary continuation of health coverage at group rates.
This coverage, however, is only available when coverage is lost due to
certain specific events. Group health coverage for COBRA
participants is usually more expensive than health coverage for active
employees, since usually the employer pays a part of the premium for
active employees while COBRA participants generally pay the entire premium
themselves. It is ordinarily less expensive, though, than individual
health coverage.
Who is entitled to benefits under COBRA?
There are three elements to qualifying for COBRA benefits.
COBRA establishes specific criteria for plans, qualified beneficiaries,
and qualifying events:
Plan Coverage - Group health plans for employers with 20 or more
employees on more than 50 percent of its typical business days in the
previous calendar year are subject to COBRA. Both full and
part-time employees are counted to determine whether a plan is subject
to COBRA. Each part-time employee counts as a fraction of an
employee, with the fraction equal to the number of hours that the
part-time employee worked divided by the hours an employee must work to
be considered full time.
Qualified Beneficiaries - A qualified beneficiary generally is an individual
covered by a group health plan on the day before a qualifying event who
is either an employee, the employee's spouse, or an employee's dependent
child. In certain cases, a retired employee, the retired
employee's spouse, and the retired employee's dependent children may be
qualified beneficiaries. In addition, any child born to or placed
for adoption with a covered employee during the period of COBRA coverage
is considered a qualified beneficiary. Agents, independent
contractors, and directors who participate in the group health plan may
also be qualified beneficiaries.
Qualifying Events - Qualifying events are certain events that
would cause an individual to lose health coverage. The type of
qualifying event will determine who the qualified beneficiaries are and
the amount of time that a plan must offer the health coverage to them
under COBRA. A plan, at its discretion, may provide longer
periods of continuation coverage.
Qualifying Events for Employees:
- Voluntary or involuntary termination of
employment for reasons other than gross misconduct
- Reduction in the number of hours of employment
Qualifying Events for Spouses:
- Voluntary or involuntary termination of the
covered employee's employment for any reason other than gross
misconduct
- Reduction in the hours worked by the covered
employee<
- Covered employee's becoming entitled to Medicare
- Divorce or legal separation of the covered
employee
- Death of the covered employee
Qualifying Events for Dependent Children:
- Loss of dependent child status under
the plan rules
- Voluntary or involuntary termination of the
covered employee's employment for any reason other than gross
misconduct
- Reduction in the hours worked by the covered
employee
- Covered employee's becoming entitled to Medicare
- Divorce or legal separation of the covered
employee
- Death of the covered employee
How does a person become eligible for COBRA
continuation coverage?
To be eligible for COBRA coverage, you must have been
enrolled in your employer's health plan when you worked and the health
plan must continue to be in effect for active employees. COBRA
continuation coverage is available upon the occurrence of a qualifying event that would, except for the COBRA continuation coverage, cause an individual to lose his or her health care coverage.
What group health plans are subject to COBRA?
The law generally covers health plans maintained by
private-sector employers with 20 or more employees, employee
organizations, or state or local governments.
What process must individuals follow to elect COBRA
continuation coverage?
Employers must notify plan administrators of a
qualifying event within 30 days after an employee's death, termination,
reduced hours of employment or entitlement to Medicare.
A qualified beneficiary must notify the plan
administrator of a qualifying event within 60 days after divorce or legal
separation or a child's ceasing to be covered as a dependent under plan
rules.
Plan participants and beneficiaries generally must be
sent an election notice not later than 14 days after the plan
administrator receives notice that a qualifying event has occurred.
The individual then has 60 days to decide whether to elect COBRA
continuation coverage. The person has 45 days after electing
coverage to pay the initial premium.
How long after a qualifying event do I have to elect
COBRA coverage?
Qualified beneficiaries must be given an election
period during which each qualified beneficiary may choose whether to elect
COBRA coverage. Each qualified beneficiary may independently elect
COBRA coverage. A covered employee or the covered employee's spouse
may elect COBRA coverage on behalf of all other qualified beneficiaries.
A parent or legal guardian may elect on behalf of a minor child.
Qualified beneficiaries must be given at least 60 days for the election.
This period is measured from the later of the coverage loss date or the
date the COBRA election notice is provided by the employer or plan
administrator. The election notice must be provided in person or by
first class mail within 14 days after the plan administrator receives
notice that a qualifying event has occurred.
How do I file a COBRA claim for benefits?
Health plan rules must explain how to obtain benefits
and must include written procedures for processing claims. Claims
procedures must be described in the Summary Plan Description.
You should submit a claim for benefits in accordance
with the plan's rules for filing claims. If the claim is denied, you
must be given notice of the denial in writing generally within 90 days
after the claim is filed. The notice should state the reasons for
the denial, any additional information needed to support the claim, and
procedures for appealing the denial.
You will have at least 60 days to appeal a denial and
you must receive a decision on the appeal generally within 60 days after
that.
Contact the plan administrator for more information on filing a claim for
benefits. Complete plan rules are available from employers or
benefits offices. There can be charges up to 25 cents a page for
copies of plan rules.
Can individuals qualify for longer
periods of COBRA continuation coverage?
Yes, disability can extend the 18
month period of continuation coverage for a qualifying event that is a
termination of employment or reduction of hours. To qualify for
additional months of COBRA continuation coverage, the qualified
beneficiary must:
- Have a ruling from the Social
Security Administration that he or she became disabled within the
first 60 days of COBRA continuation coverage
- Send the plan a copy of the Social
Security ruling letter within 60 days of receipt, but prior to
expiration of the 18-month period of coverage
If these requirements are met,
the entire family qualifies for an additional 11 months of COBRA
continuation coverage. Plans can charge 150% of the premium
cost for the extended period of coverage.
Is a divorced spouse entitled to COBRA coverage from
their former spouses group health plan?
Under COBRA, participants, covered spouses and
dependent children may continue their plan coverage for a limited time
when they would otherwise lose coverage due to a particular event, such as
divorce (or legal separation). A covered employee s spouse who
would lose coverage due to a divorce may elect continuation coverage under
the plan for a maximum of 36 months. A qualified beneficiary must
notify the plan administrator of a qualifying event within 60 days after
divorce or legal separation. After being notified of a divorce, the
plan administrator must give notice, generally within 14 days, to the
qualified beneficiary of the right to elect COBRA continuation coverage.
Divorced spouses may call their plan administrator or the EBSA Toll-Free number, 1.866.444.EBSA (3272) if they have questions about COBRA continuation coverage or their rights under ERISA.
If I waive COBRA coverage during the election period,
can I still get coverage at a later date?
If a qualified beneficiary waives COBRA coverage during
the election period, he or she may revoke the waiver of coverage before
the end of the election period. A beneficiary may then elect COBRA
coverage. Then, the plan need only provide continuation coverage
beginning on the date the waiver is revoked.
Under COBRA, what benefits must be covered?
Qualified beneficiaries must be offered coverage
identical to that available to similarly situated beneficiaries who are
not receiving COBRA coverage under the plan (generally, the same coverage
that the qualified beneficiary had immediately before qualifying for
continuation coverage). A change in the benefits under the plan for
the active employees will also apply to qualified beneficiaries.
Qualified beneficiaries must be allowed to make the same choices given to
non-COBRA beneficiaries under the plan, such as during periods of open
enrollment by the plan.
When does COBRA coverage begin?
COBRA coverage begins on the date that health care
coverage would otherwise have been lost by reason of a qualifying event.
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