Understanding COBRA

COBRA is the acronym for The Consolidated Omnibus Budget Reconciliation Act. COBRA gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. In short, COBRA provides continuation of group health coverage that otherwise would be terminated.

Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.

Click here to visit the US Department of Labor's website to learn more about COBRA. Note: Some states have laws that apply to groups that fall below the threshold for COBRA to apply. Refer to your local department and insurance for further assistance. TIPS:

Employers

1. Know when this law applies to your organization and employees enrolled in your group health plans. COBRA is a law that requires organizations with 20 or more employees to offer the continuation of group health benefits outlined above.

2. Understand your responsibilities and provide timely and accurate "in the door" and "out the door" notices to your employees and their dependents. Be aware of what events may cause the need for a COBRA notice to be sent. These include:

  • Termination of employment
  • Reduction of work hours
  • Employee's death
  • Employee's divorce (or legal separation in some states)
  • Medicare entitlement
  • Change in "dependent" status

3. Put a solid procedural infrastructure in place to deal with COBRA issues or outsource the process to an organization that specializes in this field.

4. Keep current with the changes in the law and administration guidelines from the US Department of Labor. There are cash penalties for non-compliance. This includes being aware of COBRA's interaction with other employee protection laws & other employee benefits programs.

Consumers

Understand your rights as a COBRA beneficiary and follow the instructions on your COBRA documentation. If you elect to continue coverage under COBRA law remember to pay your premium on time and inform your employer of any address changes.