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The Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. The law amends the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated.
COBRA contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available in specific instances. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees but is ordinarily less expensive, though, than individual health coverage.
The law generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments.
Under COBRA, Medical benefits provided under the terms of the group health plan and available to COBRA beneficiaries may include inpatient and outpatient hospital care, physician care, surgery and other major medical benefits, prescription drugs and any other medical benefits, such as dental and vision care.
Life insurance is not covered under COBRA. COBRA establishes specific criteria for plans, beneficiaries and events which initiate the coverage. The types of qualifying events for employees are voluntary or involuntary termination of employment for reasons other than "gross misconduct", reduction in the number of hours of employment.
The types of qualifying events for spouses are termination of the covered employee's employment for any reason other than "gross misconduct", reduction in the hours worked by the covered employee, covered employee's becoming entitled to Medicare, divorce or legal separation of the covered employee, death of the covered employee.
The types of qualifying events for dependent children are the same as for the spouse with one addition which is loss of "dependent child" status under the plan rules.
Qualified beneficiaries have the right to elect to continue coverage that is identical to the coverage provided under the plan. Employers and plan administrators have an obligation to determine the specific rights of beneficiaries with respect to election, notification and type of coverage options. They have a period of 60 days to inform the employer about their decision to continue.
COBRA beneficiaries generally are eligible to pay for group coverage during a maximum of 18 months for qualifying events due to employment termination or reduction of hours of work. Certain qualifying events, or a second qualifying event during the initial period of coverage, may permit a beneficiary to receive a maximum of 36 months of coverage.
Beneficiaries may be required to pay the entire premium for coverage. Premiums reflect the total cost of group health coverage, including both the portion paid by employees and any portion paid by the employer before the qualifying event, plus two percent for administrative costs.
This article was contributed by Prerna Mordani.
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