Employer COBRA Coverage Responsibilities

When a worker is separated from a job that offered health insurance, COBRA coverage allows the employee to continue to have coverage. Under the law, the employer has certain responsibilities regarding notification, and is subject to penalties for not fulfilling them.

COBRA Law

COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985, which enables employees who experience a job loss or reduction in hours to continue their employer-offered medical insurance under most circumstances. An amendment to the Employee Retirement Income Security Act of 1974 (ERISA), the law applies to companies with 20 or more employees.

COBRA Coverage & Your Employer

An employer is obligated to provide COBRA coverage to qualified beneficiaries if they offer a group health plan. In addition to the employee, this includes the employee’s spouse, children, domestic partners and retirees who do not qualify for Medicare, provided they were participants in the group health plan at least one day prior to a qualifying event. An employer is not required to provide COBRA coverage to employees who do not qualify for the company group plan, have elected not to participate, or are eligible for Medicare.

What Determines a COBRA Qualifying Event?

An employee becomes eligible for COBRA if he or she leaves their job voluntarily, or is laid off, downsized or otherwise terminated for any reason other than “gross misconduct.” An employee is also eligible when his/her hours are reduced, making them ineligible to participate in the company plan. Others who are eligible for COBRA coverage include reservists called up for active duty and employees who fail to return to work after family or medical leave, provided active coverage was lost during that period. If a company closes because of bankruptcy, that is considered a COBRA qualifying event.

Triggering events affecting spouses, partners or dependents include:

• divorce/separation
• death of the employee
• employee eligibility for Medicare
• a dependent’s change in status (i.e., a child who becomes too old for coverage under his/her parent’s plan)

COBRA Employer Rules

In addition to the requirements outlined above, an employer has an obligation to notify eligible employees and their spouses/dependents of their rights to COBRA coverage, both when the worker is first hired and when a qualifying event occurs. In most cases, employers have 30 days to notify the insurer or plan administrator (60 days if a spouse, partner or dependents are affected). The plan administrator then has 14 days to notify the employee.

This notice must contain several key pieces of information. In addition to including information about the plan that would be covered by the program and what that coverage would include, the notice must also include the date that the current health plan will be terminated if the employee does not opt in to coverage, and an explanation of what will happen if they do not enroll in COBRA. The notice must also include information about the event that qualifies the worker to enroll in COBRA, and the identification of any beneficiaries who are also qualified. Failure to include any of this information in the notice may result in fines or other actions against the employer.

COBRA Coverage Period

In most cases, an eligible employee can receive COBRA coverage for up to 18 months. If the employee dies or gets divorced, the former spouse and dependents can continue their benefits for up to 36 months. An employee who is determined to be disabled under Social Security can receive benefits for up to 29 months. Coverage may end if the eligible employee fails to pay premiums, obtains coverage through another employer, or becomes eligible for Medicare.

COBRA Costs

Although people who are on COBRA medical coverage have the same plan that they had while they were on their employer-sponsored coverage, these plans may cost much more under COBRA. Workers who have medical coverage through their employer only pay a portion of the costs of this insurance. Employers often pay up to 80% of the costs of health insurance for their workers. Under COBRA, the workers are entirely responsible for covering the cost of their plan, in addition to an extra 2% administrative charge. While COBRA may be a good health insurance option for people who need to continue their existing coverage in order to see the same doctors, the high cost of the program may make it prohibitive for some people to enroll. However, the cost of a COBRA plan may still be lower than other individual health coverage policies.

COBRA Regulations Violation

Employers failing to comply with COBRA regulations can face tax penalties as well as fines and civil liability. An excise tax of up to $200 per day may be assessed, as well as statutory penalties of up to $110 per day.

Join a Free COBRA Class Action Lawsuit Investigation

If you received a COBRA notice that did not fully disclose your rights and how to retain your health insurance following separation from your job, or you received no notice at all, you may be qualify to join this COBRA notice class action lawsuit investigation.

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This article is not legal advice. It is presented
for informational purposes only.