COBRA
COBRA Basics
Overview
"COBRA" stands for the Consolidated Omnibus Budget Reconciliation Act. It's not a health insurance plan, it's a law created to protect you and your family in the event that you lose your employer-sponsored health benefits.
If you qualify for COBRA coverage, you have the option of continuing your employer-sponsored health plan for a limited time. COBRA coverage requires three things: 1) that your employer is obligated to provide COBRA coverage, 2) that you are a Qualified Beneficiary, and 3) that a Qualifying Event has occurred.
COBRA Costs vs. Group Plan Costs
COBRA benefits can be costly. Unlike group health insurance plans, for which your employer usually pays some or all of the premium payments, with COBRA benefits you're usually required to pay up to the entire premium on your own, plus a 2 percent administration fee. If you extend the term of your COBRA coverage due to disability, you may be required to pay up to 150 percent of the premium.
To maintain COBRA coverage, you must pay your premiums on time. Your first premium is due 45 days after you choose COBRA benefits. After that, you're allowed to pay monthly, although some plans permit other payment terms.
You can expect your first premium to be higher than subsequent premiums because it usually takes a month or more between the date you become eligible for COBRA and the date you decide to continue your benefits under COBRA. For example, if you leave your employer on January 1st and decide to get COBRA coverage on February 1st, you will be charged for both January and February.
You may not receive a monthly statement for your COBRA coverage, but you are still responsible for making your payments on time.
Employer Requirements
Employers are obligated to offer COBRA coverage if they:
  • Offer a group health insurance plan
  • Have at least 20 employees
Federal employees do not qualify for COBRA. They are protected under a different law. If you're a Federal employee and you leave your job, contact your personnel office to learn more about continuing your health insurance benefits.
Qualified Beneficiaries
You're eligible for COBRA coverage only if you were a participant in your employer's health plan before the "Qualifying Event" occurred.
COBRA coverage is available to employees, employees' spouses, employees' dependents, and in certain cases, retired employees and their spouses and dependents. If you're expecting to give birth or are planning to adopt a child while you're receiving COBRA benefits, then that child will also qualify as a beneficiary.
You can choose COBRA coverage for yourself and your family, for yourself only, or for your family only.
Qualifying Events
A "Qualifying Event" refers to leaving your job or another event that makes you eligible for COBRA benefits. The chart below outlines the circumstances under which you and your dependents can continue your health insurance coverage under COBRA:
Qualifying Events for COBRA
Employee
  • Leaving your job voluntarily, including retirement
  • Reducing your work hours, resulting in loss of eligibility for health benefits under your employer's policy
  • Leaving your job involuntarily for reasons other than gross misconduct (e.g., layoff)
Employee's Spouse
  • Reduction in the employee's work hours
  • Loss of the employee's job for any reason other than gross misconduct
  • The employee becomes entitled to Medicare
  • Divorce or legal separation from the employee
  • Death of the employee
Dependent Children
  • Reduction in the employee's work hours
  • Loss of the employee's job for any reason other than gross misconduct
  • Loss of "Dependent Child" status under the employer health plan's rules
  • The employee becomes entitled to Medicare
  • Divorce or legal separation of dependent child's parents
  • Death of the employee
Non-Qualifying Events
Qualifying Events for COBRA are those that affect your employment status. Changes in the type of health insurance plan offered by your employer are not Qualifying Events. For example, if you remain fully employed, but your employer reduces, changes, or cancels its health insurance plan, you do not qualify for COBRA coverage.
COBRA Coverage
Health insurance coverage under COBRA must be identical to the coverage your employer offers its current employees. This means that you should get the same coverage as you did before as an employee after your employment ends or another Qualifying Event occurs.
Under COBRA, you are entitled to no more than the same benefits as current employees have. This means that if your employer cancels its health insurance plan, you will no longer be entitled to COBRA benefits. If your employer reduces coverage to current employees, your coverage will also be reduced.
Providing Notice - the Plan Provider's Responsibilities
When you join your employer's health insurance plan, by law, the plan administrator must provide you with an "Initial Notice," explaining your rights under COBRA.
By law, when a Qualifying Event occurs, your employer must provide you with "Specific Notice" that you are eligible to continue your coverage under COBRA. You may be informed in person, or you may receive notice by mail.
Providing Notice - Your Responsibilities
Once you receive notice of your eligibility for COBRA, you have 60 days in which to choose COBRA benefits. If you choose to receive COBRA benefits, your coverage will be retroactive to the day you lost your health insurance benefits due to the Qualifying Event.
If you reject COBRA benefits initially, you can change your mind within 60 days of your Qualifying Event, by informing your employer that you want COBRA coverage. Your coverage begins on the day you inform your employer.
You are responsible for notifying your plan administrator after certain Qualifying Events occur, including divorce, legal separation, or loss of Dependent Child status. The deadline for reporting these Qualifying Events varies depending on your plan's rules. Many plans require notification within 60 days of the Qualifying Event.
COBRA Term
COBRA benefits last for 18 months. If you choose to receive COBRA benefits initially, your coverage begins on the first day that you would have lost your health insurance benefits due to your Qualifying Event. If you initially rejected COBRA, and then changed your mind within the 60-day window, your coverage begins on the day you notify your employer.
Your COBRA term can be shortened if:
  • You fail to pay your premiums on time
  • Your employer cancels its health insurance plan
  • You obtain coverage through another employer
  • You or one of your dependents become eligible for Medicare benefits
Your COBRA term can be extended if you become disabled within your first 60 days of COBRA coverage. To qualify for an extension, you must submit a Social Security Administration ruling stating that you have become disabled. If you qualify, then you and your family may extend your COBRA coverage for another 11 months. However, you may be required to pay up to 150 percent of the premium cost for those additional 11 months. A spouse or dependent may extend their COBRA coverage period for up to 18 additional months under the following circumstances: divorce or separation from the covered employee, death of the employee, loss of dependent status for a child, or the employee becoming eligible for Medicare within the COBRA period.
COBRA Deadlines
Employee must receive initial notice of COBRA rights ... 14 days after the employee enrolls in the employer's health insurance plan
Qualifying Event notice:
1. Employment termination or reduction of hours:
  • Employer must notify the insurance company within ...
  • Insurance company must notify the employee within ...
2. Divorce, loss of dependent child status, or employee becomes eligible for Medicare
30 Days 14 Days 60 days from Qualifying Event
Employee must decide whether to choose COBRA coverage ... Within 60 days after date of notice of eligibility due to Qualifying Event
Employee's first premium payment is due ... Within 45 days after the employee chooses COBRA coverage
Employee is eligible for disability extension ... If the disability occurs within 60 days of COBRA coverage
COBRA coverage time limits
  • Initial COBRA term ends after ...
  • Extension due to disability ends after ...
  • Extension for spouse, dependent child, or employee becomes eligible for Medicare ends after ...
18 months 29 months 36 months
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