What is COBRA? 2011-06-24

What Is COBRA? The Consolidated Omnibus Budget Reconciliation Act (COBRA) is federal legislation requiring some employers to offer terminated employees the right to purchase medical expense insurance coverage at group rates. The following employers are not required to provide continuation coverage for their employees: 1) Employers with fewer than 20 employees 2) Churches 3) Government employers. An eligible employee may elect "continuation coverage" during the 60-day period immediately after the later of two dates: 1) the date the coverage for the person terminates, or 2) the date the plan administrator notifies a qualified beneficiary of the beneficiary's right to continue coverage. A "qualifying event" is one of the three types of changes in an employee's or dependent's status that makes him or her eligible for continuation coverage under COBRA. The three types of changes are: 1) Termination of employment, except for gross misconduct of change to part-time status 2) The loss of coverage by a dependent because of the employee's death, divorce, legal separtationm or by eligibiity for Medicare 3) The loss of dependency status by children of employees (for example, attainment of maximum age limit). Termination of employment will make the affected employees eligible for 18 months of continuation coverage, while other "qualifying events" permit 36 months of coverage. If termination is due to disability, the employee must be permitted to continue coverage for 29 months. If an employee takes leave under the Family and Medical Leave Act but then does not return to work, the qualiying event under COBRA is treated as occurring on the last day of the leave. The following persons are "qualified beneficiaries" (if a "qualifyin event" has occurred): 1) A covered employee 2) A covered employee's spouse 3) A covered employee's dependent children. During the period of continuation coverage, the employer may require the employee to pay up to 102% of the cost of the continued coverage. When the maximum period for continuation coverage terminates, an employee must be able to exercise the conversion rights that are otherwise available under the plan. The government imposes a noncompliance fine on an employer equal to $100 per day per participant.