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COBRA
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COBRA Frequently Asked Questions [FAQs]
What is COBRA?
Congress passed the 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. 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.
Which employers must comply with COBRA?
COBRA applies to employers that offer their employees health coverage and that employed 20 or more employees on 50 percent of the business days during the preceding calendar year. All full- and part-time common-law employees are considered in determining whether an employer had fewer than 20 employees; however, each part-time employee counts as a fraction of a full-time employee.
What is a COBRA Qualifying Event?
For a covered employee, a "qualifying event" can include:
- Voluntary or involuntary termination of employment (other than for gross misconduct)
- Reduction in the number of hours of employment
For a spouse or dependent child, a "qualifying event" can include:
- Voluntary or involuntary termination of the a covered employee’s termination of employment (other than for gross misconduct)
- Reduction in the number of hours worked by a covered employee
- Covered employee’s death
- Divorce or legal separation from a covered employee
- Loss of dependent child status under the plan rules
- Entitlement to Medicare by a covered employee
What is a Qualified Beneficiary?
A "qualified beneficiary" can be:
- An employee covered under a group health plan
- A spouse of a covered employee
- A dependent child of a covered employee
- A child born to, or placed for adoption with, a covered employee during the period of COBRA coverage
How long does COBRA coverage last?
Continuation coverage can last for up to 18 months for termination or reduction in hours of employment (29 months for certain disabled qualified beneficiaries and their nondisabled family members) or 36 months for other events, depending on the qualifying event. Also, a special "multiple qualifying event" rule may extend the 18-month period to 36 months.
What causes COBRA coverage to terminate?
COBRA coverage terminates once the 18 or 36 month period expires. COBRA coverage can terminate early if the qualified beneficiary fails to pay the premium on time or becomes covered under another group health plan or Medicare after the COBRA election date. The maximum period may end if the employer terminates all of its group health plans or if the qualified beneficiary requests early cancellation.
What is the purpose of the General (Initial Rights) COBRA Notice?
The initial COBRA notice is an essential component to COBRA compliance. The notice must be provided to covered employees and their spouses when they first become covered by a group health plan, to inform them of their COBRA rights and responsibilities under COBRA, should a qualifying event occur.
When must the General (Initial Rights) Notice be sent to Covered Employees and Spouses?
In its final regulations, the Department of Labor established that the initial notice must be furnished within 90 days after the date the individual’s becomes covered under the plan or, if later, 90 days after the date the plan becomes subject to COBRA’s requirements.
How is COBRA premium collection handled?
Igoe Administrative Services collects premiums directly from the COBRA continuants and issues payment to the employer on a monthly basis.
Payment amounts are based on the current group premium rate plus a two percent administrative fee. A coupon book is mailed to the COBRA participant after the COBRA election is received. Payments must be made in the form of check or money order and should be made payable to Igoe Administrative Services. The initial premium payment is due 45 days from the date the election is made. Once payment is received, the applicable insurance carrier(s) are notified. Coverage is activated retroactive to the date coverage was lost as a result of the Qualifying Event. Monthly premiums are due each month thereafter, in full, on the first day of each month. COBRA participants are granted a 30-day grace period (mandated by law).
What are the responsibilities of the COBRA participant?
The COBRA participant is responsible for making a COBRA election within the 60-day enrollment period and paying the initial premium payment within the 45-day grace period. Thereafter, the participant is responsible for paying premium, in full, within the 30-day grace period, updating the Plan Administrator with any address or eligibility changes, timely notifying the Plan Administrator of a determination of disability by the Social Security Administration and timely notifying the Plan Administrator of any multiple qualifying events.
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