The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed in 1987. It is a temporary benefit offered to individuals once their employment or eligibility ends in a group health insurance plan. Individuals may elect to continue participating in the company medical, dental, or vision plan. They may elect to enroll in the COBRA plan with equal or lesser coverage. Participants will be required to pay up to 102% of their premiums including the employer portion of the costs.
Eligible persons are considered qualifying beneficiaries under COBRA. Qualifying beneficiaries include former employees and their spouses, ex-spouses, and children.
Companies with 20 or more employees are required to offer COBRA to all former employees, regardless of whether they left voluntarily or involuntarily. COBRA is also offered to active employees who have a reduction in hours resulting in a loss of coverage. In addition, Medicare entitled employees may also enroll their eligible spouses and children in COBRA to prevent a loss of coverage. If needed, disabled beneficiaries may qualify for an 11 month extension.
There are several qualifying events that result in COBRA eligibility. The period of time a qualifying beneficiary is eligible to participate in COBRA is contingent on the event resulting in a loss of coverage. These events include:
Termination of Employment: Former employee may elect COBRA up to 18 months
Divorce: Ex-spouse may elect COBRA for up to 36 months
Death of Employee: Surviving spouse and children may elect COBRA for up to 36 months
Medicare Entitlement: Spouse and children losing coverage may elect COBRA for up to 36 months
Reduction of hours of employment: Employee may elect COBRA up to 18 months
Eligible Child Ages out of plan: Child may elect COBRA up to 18 months
Under COBRA, plan costs may change annually during Open Enrollment. However, plan deductibles, coverage limits and copayments must remain the same.