COBRA Basics

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed to provide employees (or former employees), their spouses and dependents with a temporary extension of group health insurance when coverage is lost due to certain “qualifying” events. Generally, COBRA coverage must be identical to the coverage provided to current employees. COBRA applies to all groups with 20 or more employees, on a typical business day, regardless of their eligibility for your group health plan. For purposes of determining employee count, include part-time employees as “fractional” employees. For example, two part-time employees working 15 hours per week would be counted as one full-time employee if 30 hours per week is considered fulltime employment.

COBRA gives employees and their eligible dependents covered on the date coverage would otherwise end (Qualified Beneficiaries) the option, under certain conditions, of continuing their group health care coverage beyond the date they would otherwise be eligible under the Group Master Contract. This provision includes health coverage as well as dental, vision and prescription drug coverage (if these coverages are offered by your group as part of the “core” coverage and not offered by separate contract).

Qualified Beneficiary

A Qualified Beneficiary refers to an individual who is covered under the employer’s group health plan who is eligible for continuation coverage under COBRA. A Qualified Beneficiary is a covered employee, covered spouse of the employee, covered dependent child of the employee covered under your plan on the day before the Qualifying Event. Any child born to, or placed for adoption with, a Qualified Beneficiary during the period of continuation coverage will also be considered eligible for continuation coverage.

Qualifying Events

“Qualifying Events” are events that would cause individuals to lose health coverage if COBRA continuation coverage were not available. The type of qualifying event will determine who the qualified beneficiaries are and what the required amount of time is that you must offer the coverage to them under COBRA. Beneficiaries have 60 days from the date of the qualifying event, or the date they are notified of their rights (whichever is later), to elect continuation coverage

Duration of Coverage

Employees must be offered continuation coverage for up to 18 months after coverage would otherwise end because:

1. employment is terminated for any reason, other than gross misconduct;

2. hours of employment are reduced.

Continuation coverage must be provided for up to 29 months if the member is considered disabled under Title II or Title XVI of the Social Security Act (within 60 days of the qualifying event) and coverage would otherwise end because:

1. employment is terminated for any reason, other than gross misconduct;

2. hours of employment are reduced.

Continuation coverage must be provided for up to 36 months for:

1. surviving legal spouse or children;

2. a separated or divorced spouse, and/or dependent children who are ineligible for Medicare;

3. children who have reached the limiting age or who no longer meet the definition of an eligible dependent as stated in the contract.

End of Coverage

Coverage begins on the date that coverage would otherwise have ended due to a Qualifying Event and will terminate:

1. at the end of the applicable 18, 29, or 36-month period;

2. if and when all health plans you provide to all of your employees are canceled;

3. if the beneficiary stops paying the premiums;

4. if the Qualified Beneficiary becomes eligible for Medicare;

5. the Qualified Beneficiary obtains other group coverage and satisfies the pre-existing condition limitations, if any, which apply to the other coverage;

6. the Qualified Beneficiary is no longer considered disabled for Social Security purposes (if coverage was continued due to disability).

Paying for COBRA Coverage

If a Qualified Beneficiary elects COBRA continuation coverage, he or she is responsible for paying for such coverage. The group is, however, responsible for billing the Qualified Beneficiary. On a monthly basis, COBRA participants may be billed up to 102% of their premium. Qualified Beneficiaries continuing coverage based on disability may be billed up to 150% of the applicable premium for such coverage (after 18 months of continuous COBRA coverage). Qualified Beneficiaries will have 45 days after the date on which they chose COBRA coverage to pay the initial premium. The first payment should be made retroactive to the qualifying event.

Most employers collect the COBRA premium in advance. However, at least a 30-day grace period for a COBRA beneficiary to pay the premium must be allowed. If payment due from the Qualified Beneficiary is late, please code the beneficiary as canceled due to nonpayment until payment is received in order to prevent claims from being paid.

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