Definition
Consolidated Omnibus Budget Reconciliation Act (COBRA) refers to a federal law passed in 1985 that mandates employers to offer the opportunity for employees and their families to continue their group health benefits in situations where these benefits would otherwise be terminated. This continuation of coverage applies to several qualifying events including voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events.
Examples
- Job Loss: An individual who loses their job can continue their existing group health insurance coverage for a limited period under COBRA.
- Reduction in Work Hours: An employee whose working hours are reduced, making them ineligible for the employer’s health plan, can maintain their existing health coverage through COBRA.
- Divorce: A spouse who loses health insurance coverage because of a divorce is eligible to continue their health insurance through COBRA.
Frequently Asked Questions (FAQs)
Q1: How long does COBRA coverage last?
A1: The duration of COBRA coverage depends on the qualifying event. Typically, COBRA coverage can last for up to 18 months, but it can be extended to 36 months in certain circumstances like disability or other secondary qualifying events.
Q2: Who is eligible for COBRA coverage?
A2: COBRA coverage is available to employees who have lost their jobs or had a reduction in work hours and their covered dependents, including spouses and dependent children.
Q3: Who pays for COBRA coverage?
A3: Under COBRA, the individual electing continuation coverage generally pays the full premium, which may include a 2% administrative fee, making it potentially more expensive than employer-sponsored health insurance.
Q4: How is COBRA activated?
A4: When an employee experiences a qualifying event, they should receive a COBRA election notice from their employer or the group health plan administrator. The individual then has a 60-day window to decide whether to elect COBRA continuation coverage.
Q5: Does COBRA apply to all employers?
A5: COBRA generally applies to employers who had 20 or more employees on at least 50% of its typical business days in the previous calendar year.
Related Terms with Definitions
- Continuation of Benefits (COB): This refers to the ability to keep certain employee benefits, often health insurance, after leaving a job.
- Qualifying Event: Specific situations that can trigger COBRA coverage, such as job loss, reduction in work hours, divorce, and death.
- Group Health Plan: A health insurance plan typically offered by an employer that provides healthcare services to employees and their families.
- Premium: The amount paid periodically (e.g., monthly) by an insured party to keep their insurance policy active.
Online References
- U.S Department of Labor: COBRA Continuation Coverage
- Healthcare.gov: Learn About COBRA Insurance
- Internal Revenue Service (IRS): COBRA Coverage and Health Insurance Provisions
Suggested Books for Further Studies
- “The COBRA Handbook” by Gary V. Powis: An essential guide for understanding COBRA regulations and compliance.
- “Employee Benefits Design and Compensation (Collection)” by Bashker D. Biswas: Comprehensive coverage of various employee benefit programs including COBRA.
- “Employee Benefits Law: ERISA and Beyond” by Jeffrey D. Mamorsky: Insightful take on employee benefits law with detailed information on COBRA administration.
Fundamentals of COBRA: Employee Benefits Basics Quiz
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