If you’ve recently left jobs or lost health coverage, you may have had someone mention COBRA. (No, we’re not talking about the snake). COBRA – also known as the Consolidated Omnibus Budget Reconciliation Act – requires group health plans to offer continuation coverage to covered employees, former employees, spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain events. COBRA insurance allows you to keep your employer-sponsored plan temporarily, but it comes with a hefty price tag.
Who is eligible for COBRA?
COBRA is available for people who quit their job or are:
- Laid off
- Fired and it wasn’t for “gross misconduct”
- Without insurance because an employer cuts your hours
- Without coverage because of a divorce, a spouse’s death or other qualifying events
Your dependents can also get coverage if:
- You die
- Your child turns 26 and is no longer eligible for a parent’s plan
- A divorce or legal separation
- You become eligible for Medicare
When one of these events occurs, the administrator must send out COBRA notices to the employee or their dependents within 30 days of the qualifying event. COBRA sets rules for how and when plan sponsors must offer and provide continuation coverage, how employees and their families may elect continuation coverage, and what circumstances justify terminating continuation coverage.
How Does COBRA Work for Individuals?
Employees who were actively enrolled in health insurance coverage for at least one day, but lost it due to a change from full-time to part-time employment or termination (voluntary or involuntary), are eligible for COBRA.
- Employees who work for a company with at least 20 full-time employees and who have been enrolled under their employer’s insurance for at least one day are eligible for Federal COBRA. There is no minimum number of work days required to be eligible for COBRA.
- Employees who work for a company with less than 20 full-time employees and who have been enrolled under their employer’s insurance may be eligible for State COBRA, if they’ve worked the minimum number of days determined by the state where their insurance plan is provided.
You can use COBRA for up to eighteen months and COBRA allows for the families of deceased employees to use the insurance for 36 months.
What Steps Do Businesses Have to Take When Administering COBRA?
When one of these events occurs, the administrator must send out COBRA notices to the employee or their dependents within 30 days of the event. If the recipient enrolls in COBRA, the administrator is responsible for collecting premiums, sending notices, enrollment, tracking and termination. All employers should make sure these administrative steps are being completed and done so in a timely manner.
COBRA administration requires four basic compliance components:
- Notifying all eligible group health care participants of their COBRA rights.
- Providing timely notice of COBRA eligibility, enrollment forms, duration of coverage and terms of payment after a qualifying event has occurred.
- Collecting premiums, reinstating coverage and supplying appropriate notices if premiums are not received.
- Providing timely notices when COBRA coverage ends before the expected duration and responding to individuals seeking coverage who are not eligible for COBRA.
Administering COBRA can be costly and time-consuming to stay in compliance. That’s why it’s imperative for health insurance brokers to educate and support their clients with this. At Steve Grady Insurance Services, we do just that.
Have more questions regarding COBRA? Give us a call or visit our website today.
Sources:
- https://www.shrm.org/resourcesandtools/tools-and-samples/how-to-guides/pages/howtoadministercobra.aspx
- https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra.pdf
- https://smallbusiness.chron.com/employee-guide-cobra-4866.html