The Consolidated Omnibus Budget Reconciliation Act of 1985, COBRA is the federal law that provides rights to temporary continuation of a group health plan coverage for certain employees, retirees and family members at group rates when coverage is lost due to certain qualifying events. Workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.

COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

COBRA outlines how employees and family members may elect continuation coverage. It also requires employers and plans to provide notice.

There are 3 elements to qualifying for COBRA benefits.  COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:

Plan Coverage – Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA.  Both full and part-time employees are counted to determine whether a plan is subject to COBRA.  Each part-time employee counts as a fraction on an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time.

Qualified Beneficiaries – A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee’s spouse, or an employee’s dependent child.  In certain cases, a retired employee, the retired employee’s spouse, and the retired employee’s dependent children may be qualified beneficiaries.  In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary.  Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.

Qualifying Events – Qualifying events are certain events that would cause an individual to lose health coverage.  The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA.  A plan, at its discretion,  may provide longer periods of continuation coverage.

The 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 qualifying events for spouses are:

• Voluntary or involuntary 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 qualifying events for dependent children are the same as for the spouse with one addition:

• Loss of dependent child status under the plan rules