Explanation of Federal COBRA Benefits for Health Insurance

In 1986, congress approved the Consolidated Omnibus Budget Reconciliation Act known as COBRA. This series of laws and regulations changed how a terminated employees' health insurance was handled by both employers and insurance companies.

What is COBRA?

• COBRA law mandates that an employee's health insurance coverage may be continued in certain situations and if certain criteria are met both before and after that worker is terminated. If an employee is deemed eligible to maintain health insurance after termination, that worker will actually remain covered on the same group medical plan and have the same benefits as every other active employee at the company. COBRA law also requires that employers maintain specific records regarding health insurance plans, and communicate with workers about important dates and changes to the company's group medical plan.

Who is Eligible?

• Very specific and detailed descriptions of exactly who is eligible to maintain coverage after termination have been written into the COBRA law. To put it simply, any employee or dependent who was already covered at the time the worker's employment was terminated may continue the health insurance plan.

How Long Does It Last?

• In the majority of situations, health insurance coverage maintained via COBRA can stay active for a maximum period of 18 months. At the end of 18 months, terminated employees and their dependents are no longer eligible to keep their prior medical plan. However, if certain qualifying events take place during that initial 18 month period, COBRA continuation can sometimes be extended for another 18 months, bringing the maximum duration of the coverage period to three years.

What Does It Cost?

• Many employees who elect to continue their health insurance coverage under COBRA are shocked at just how expensive their medical plan is. Most employers contribute at least a small portion of the total monthly premium for the plan, but after an employee's termination, the company is not required to share in the cost. The entire premium for coverage becomes the former employee's responsibility for as long as coverage is maintained.