COBRA Terms and Information

“COBRA” stands for Consolidated Omnibus Budget Reconciliation Act of 1985 (implemented in 1986).

COBRA is the federal health care continuation law. COBRA requires that if an employee or other “qualified beneficiary” loses employer-provided health coverage due to termination of employment or another specified “qualifying event,” the group health plan must offer continued health care coverage to the qualified beneficiary. The qualified beneficiary may be (and typically is) required to pay the full cost for the coverage, plus a 2% administration charge.  Coverage may be extended from 18 to 36 months.

Qualified Beneficiaries: A covered employee is a Qualified Beneficiary, as are the employee’s covered spouse (legal spouse, not domestic partner), covered dependent child of the employee, or any children born to or adopted by the covered employee. Qualified Beneficiaries have the same rights as Active Employees. Remember this, it will help you later!  If you’d like to compare the cost of COBRA vs an  individual plan, we’re happy to provide that information.

COBRA coverage has limited duration. In most cases, the maximum COBRA period is 36 months from the date of the qualifying event for qualifying events occurring after January 1, 2003.  You may add newly acquired dependents (spouse or children) while on COBRA.

COBRA effects groups of 20 OR MORE EMPLOYEES, based on 50% of the workdays in the previous calendar year.  Employee count includes all full and part time employees on the payroll. How many employees did you have last year?

“CAL-COBRA” applies to groups of 2-19 employees in California.  It extends coverage for those employees who experience a qualifying event, just like federal COBRA, but the insurance carriers are required to bill the COBRA beneficiary, not the employer.  Coverage will extend for 36 months.  CalCOBRA may also apply to those covered for 18 months by a “Federal” COBRA plan, requiring an additional 18 months of coverage at 110% of the employer premium.

Qualifying Events: Voluntary or Involuntary Termination of employment, Reduction of Hours, Death of the employee, Divorce, Employee’s Medicare Entitlement (there are specifics details to watch here), Disability, Dependent Child ceasing to be a Dependent, Bankruptcy of the Employer (again, this is unusual so call for details). Qualifying events trigger COBRA for 18 to 36 months and may lead into a CalCOBRA extension for California Employers.

Coverage Subject to COBRA:  COBRA applies to Medical, Dental, Vision, Prescription plans, Medical Reimbursement FSAs. It does not apply to Life Insurance or Disability Insurance. HOWEVER, Group Life Plans typically have a 30 day Conversion option which should be offered to employees, and many group LTD plans are also convertible.

COBRA notification requirements and the text of required letters and notices can be complex, and change periodically.  There are COBRA Administration firms who will handle the responsibility of employee notification and other compliance issues.  Many employers enjoy “outsourcing” these responsibilities, and we can help you set up such a service.

COBRA may now last up to 36 months, based on California’s AB1401.  This law states that individuals who began receiving federal COBRA on or after January 1, 2003, who were entitled to less than 36 months of coverage under federal COBRA, and who exhaust that coverage may be eligible to continue coverage through CalCOBRA for up to 36 months from the effective date of the federal COBRA coverage. To view the text of the bill in its entirety, click here.

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