Consolidated Omnibus Budget Reconciliation Act (COBRA)
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law passed in 1985 that mandates employers with 20 or more employees to offer continuation of group health coverage to employees and their dependents who lose their health benefits due to specific qualifying events. These events include job loss, reduction in work hours, transition between jobs, death, divorce, and other life events.
Under COBRA, the individual must pay the entire premium for coverage, up to 102% of the cost to the plan. This allows former employees and their dependents to maintain health insurance at group rates, which may be more affordable and accessible than individual health plans.
Examples
- Job Loss: An employee who is laid off can choose to continue their existing group health insurance plan through COBRA by paying the necessary premiums.
- Reduction in Hours: A full-time employee whose hours are reduced to part-time status may lose eligibility for group health benefits but can elect to continue coverage under COBRA.
- Divorce: A spouse who loses coverage due to divorce from an employee can continue the same plan under COBRA.
- Death: Dependents of a deceased employee can retain their health insurance coverage temporarily through COBRA.
Frequently Asked Questions
Q1: How long can coverage be continued under COBRA?
A1: Coverage can generally be continued for 18 to 36 months depending on the qualifying event.
Q2: Who is eligible for COBRA coverage?
A2: Employees, their spouses, and dependent children are eligible for COBRA in the event of specific qualifying circumstances such as job loss, reduction of hours, transition between jobs, death, and divorce.
Q3: How does an individual enroll in COBRA?
A3: The employer must provide a COBRA election notice within 14 days of the qualifying event. Individuals must then elect COBRA coverage within 60 days of receiving the notice.
Q4: What is the cost of COBRA coverage?
A4: The cost includes the full premium for the coverage, which the employee must pay, plus up to a 2% administrative fee, totaling up to 102% of the cost.
Q5: What happens if COBRA payments are not made on time?
A5: Coverage can be terminated if COBRA premiums are not paid on time, typically within 30 days of the due date.
Related Terms
Health Insurance Portability and Accountability Act (HIPAA): Federal law that also affects COBRA plans by ensuring the privacy and security of healthcare information.
Affordable Care Act (ACA): Legislation aimed at expanding healthcare coverage, consumer protections, and initiatives to reduce healthcare costs.
Employee Benefits: Non-wage compensation provided to employees in addition to their normal wages or salaries.
Online Resources
- U.S. Department of Labor - COBRA
- Internal Revenue Service - COBRA Health Coverage
- Healthcare.gov - COBRA Coverage & Alternatives
Suggested Books for Further Studies
- “Employee Benefits and Executive Compensation” by Adam N. Jorns and Jessica S. Farnsworth
- “The Handbook of Employee Benefits: Health and Group Benefits” by Jerry S. Rosenbloom
- “Introduction to US Health Policy: The Organization, Financing, and Delivery of Health Care in America” by Donald A. Barr
Fundamentals of Consolidated Omnibus Budget Reconciliation Act (COBRA): U.S. Law Basics Quiz
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