About the COBRA Act of 1985

The Consolidated Omnibus Budget Reconciliation Act of 1985 helps workers who lose their jobs keep their health insurance. Group health insurance through an employer is normally less than the cost of an individual plan. The former employee pays the full premium under COBRA, but the plan is still less expensive than single coverage, according to the U.S. Department of Labor.

Function

• COBRA gives a worker who was fired, quit or lost hours the right to buy coverage for herself and her family through the former employer's group health insurance plan. Other qualifying events include the time between leaving an old job until coverage at a new job starts and divorce. The worker must have been enrolled in the health insurance plan before losing work.

Procedure

• All employers covered by COBRA's provisions have to contact the person responsible for managing the group health insurance within 30 days of an acceptable event. A family member who is eligible for COBRA but separated by an event, such as a divorce, must contact the responsible person within 60 days.

  The health plan administrator should give written notice to the former employee and his family about COBRA availability and premium costs by two weeks after a qualifying event, giving him two months to decline or accept coverage. His first premium must be paid in full 45 days after he accepts coverage.

Premiums

• The employer does not have to pay any part of the health insurance cost for a person receiving coverage under COBRA. The former worker's premium cannot be more than 102 percent of the cost of the coverage, with the 2 percent covering the employer's administrative expenses. The worker has the right to request the premiums be paid monthly. The former employee pays all co-pays and other out-of-pocket costs associated with the coverage.

Duration

• COBRA requires former employees have coverage available for at least 18 months after the group health coverage would have otherwise ended, but the health insurance company can provide COBRA benefits longer. Some situations allow COBRA coverage to end early, such as if the former employee does not pay the premiums or the employer no longer has any group health insurance available.

Considerations

• Not all employers provide continuation coverage, as COBRA's provisions are aimed at employers who offer health insurance and have at least 20 employees, public and government agencies and employee organizations. A worker who was fired for gross misconduct, such as committing a crime while working, is not eligible for COBRA.

  A person receiving insurance under COBRA receives the same benefits and subject to the same rules and coverage changes as an active employee on the same plan.