One of the most important benefits that workers receive is health insurance. Employers receive special rates on group health coverage, and they usually pay a portion of the premium for each eligible employee and his or her family. When workers become unemployed, obtaining other health insurance may be difficult or prohibitively expensive.
The Consolidated Omnibus Budget Reconciliation Act, or COBRA for short, was passed in 1986 to address this problem. In addition to employees who are laid off or fired for a reason other than gross misconduct, or who voluntarily quit their jobs, it also helps those who experience other situations that cause loss of coverage. These include reduction in hours and entitlement to Medicare. Family members may also be eligible for COBRA benefits if the covered employee dies or divorces or separates from his or her spouse, or if a covered child loses dependent status.
Under COBRA, qualifying employees and their covered family members are entitled to continue their insurance coverage when coverage would otherwise be lost. This continuation is temporary. Depending on the event that would have caused loss of coverage, COBRA coverage may be required for a maximum of 18 to 36 months. Employers may, however, elect to offer coverage beyond these limits.
In most cases, the individual must pay the entire premium if he wishes to continue coverage under COBRA. The employer is also allowed to require the individual to pay a 2 percent administrative charge. Continuation coverage usually costs the individual more than group coverage while employed, but it ordinarily costs less than health insurance purchased outside of a group plan.
COBRA regulations apply to most employers that offer health insurance plans. Private sector employers with at least twenty employees must offer continuation coverage, as must all state and local governments. The federal government, however, is exempt, as are churches and some church-related organizations.
It is the group health plan’s responsibility to notify employees and spouses of their eligibility for COBRA continuation coverage. Notice must be provided within 90 days of receipt of notice of the qualifying event. The plan must provide information about the continuation coverage, its costs and the name and contact information of the COBRA administrator. Beneficiaries have at least 60 days to choose whether or not they wish to continue their coverage.
The loss of health insurance can be devastating. But by taking advantage of their rights under COBRA, those who have experienced events that disqualify them from group health plans offered by their employers can keep their coverage for a while. This is usually more expensive than it would otherwise be, but it can tide beneficiaries over until they qualify for insurance under another plan.
