COBRA or Consolidated Omnibus Budget Reconciliation Act of 1985, is a federal law mandatory for all employers who have 20 or more employees. Based on the COBRA law, the employers who offer health care benefits are required to offer coverage to employees who might lose their health benefits for the following reasons:
– Reduction in hours
– Termination of employment
– Other events.
COBRA law can vary from state to state, and some states might have COBRA-like laws. The differences are mostly in the coverage, which can include all employers, the small ones as well. So even if you are not a subject of federal law, you might be a subject of state law. For more information about the law in your state, state labor agencies and attorneys can give you necessary guidelines.
Every employer has to be familiar with the basics of the COBRA law, such as:
- What events are qualified to be covered by COBRA law
- What kind of benefits are included in COBRA?
- Which employers must provide COBRA benefits?
What events are qualified to be covered by COBRA law?
The following events are qualifying by COBRA law:
– Termination of employment, both voluntary or involuntary
– Reduction in hours (from full time to part-time)
– An employee’s entitlement to Medicare
– In case employee’s dependent change the status (eg. because of the age it can’t be under the parent’s health insurance plan)
– Employee’s death
– Active military duty when you don’t voluntarily maintain health coverage
– Failure to return to work at the end of family and medical leave where coverage was in effect at the beginning of the leave but was lost during the leave
– Your business’s bankruptcy
– If covered spouse’s legal separation or divorce from an employee.
Types of benefits included in COBRA
In case the qualified event happens, the employer is required to offer the following plans to the employees:
– health care plans
– dental plans
– vision plans
– hearing plans
– mental health plans
– medical spending accounts
– prescription drug plans
– alcohol and substance abuse plans.
COBRA law does not require employers to offer disability or life insurance, as well as the vacation and retirement plans.
Who has to provide COBRA benefits?
Every employer who has a group health plan has to provide COBRA coverage to all eligible employees, such as:
– full time and part-time employees included in the employers’ health care plan on the day before the qualifying event
– dependents of employees
– spouses of employees
– partners in a partnership
– retirees who are not eligible for Medicare.
The employer is not required to offer COBRA benefits to the employees who are not included in his group health plan and those who refused to be included (even if they are eligible), and to employees eligible for Medicare.
COBRA benefits and employer communication duties
By the regulations noticed in COBRA law, every employer is required to notify employees in the following situations:
– To inform covered employees about their rights to continue coverage after a qualifying event occurs
– To inform covered employees and covered spouses of their initial rights under COBRA when they first join the plan.
– To notify the plan administrator in maximum 30 days (usually the insurance company) when a qualifying event occurs for any of the reasons mentioned above, except for divorce and change of status by a dependent (in these cases, the employer has 60 days’ limit). Following, the administrator is responsible to inform the entitled person about its COBRA coverage in maximum14 days.
What is the length of the COBRA coverage?
COBRA coverage can last continuously for 18 months in case of termination or reduction in hours, or 36 months in case of other reasons, from the day of the event, depending on the event type and who the beneficiary is.