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A Basic Guide to COBRA
The Consolidated Omnibus Reconciliation Act (COBRA) The Consolidated Omnibus Reconciliation Act (COBRA), signed in 1986 by Ronald Reagan, gives former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage from their previous employer.
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 in determining whether a plan is subject to COBRA.
In general, an employee, the employee's spouse or an employee's dependent child are eligible for COBRA. 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 may be qualified. Agents, independent contractors and directors who participate in the group health plan may also be qualified. All participants must been enrolled in the former company’s health plan prior to the qualifying event. Qualifying events for employees are:
Voluntary or involuntary termination of employment for reasons other than "gross misconduct"
Reduction in the number of hours of employment
Qualifying events for spouses are:
Voluntary or involuntary termination of employment for reasons other than "gross misconduct"
Reduction in the hours of employment worked by the covered employee
Divorce or legal separation of the covered employee
Death of the covered employee
Qualifying events for dependent children are the same as for the spouse with one addition:
Loss of "dependent child" status under the plan rules
Benefits generally last for 18 months. Special rules for disabled individuals and certain family members may extend the maximum period of coverage to 36 months.
Former employers, spouses and/or children have 60 days to elect COBRA under the original COBRA regulations. Cobra premiums must be paid all the way back to the beginning of the election period. Please see below for changes from the stimulus package.
For more information, go to the Department of Labor Site FAQ page.
The American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009, also known as the Cobra Stimulus plan, contains a provision in that reduces Cobra premiums by 65% for those were involuntarily terminated between September 1, 2008 and December 31, 2009.
To be eligible for assistance, participants’ annual income must be below $125,000 for single people or $250,000 for couples.
Subsidies are reduced for those with modified adjusted gross incomes of up to $145,000 for single people or $290,000 for couples.
COBRA premium assistance ends if a participant becomes eligible for another group health plan or Medicare.
Employers will be required to send notices of premium assistance to former workers who qualify.
Participants also have extra time to decide whether or not to elect COBRA, even if they originally declined coverage, as longs their election period began on or after Sept. 1, 2008. This special period began on Feb. 17, 2009, and ends 60 days after the participant receives a notice from his/her plan about the availability of premium assistance.
If a participant takes advantage of this COBRA premium assistance, it will not extend the end date of his/her COBRA benefits period.
Employers will receive compensation for the reduced COBRA premiums through payroll-tax deductions.
For more information, please see the Department of Labor website Stimulus page.
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