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Does COBRA Apply When an Employer Terminates a Health Plan?

The Consolidated Omnibus Budget Reconciliation Act of 1986, as amended, is commonly referred to as COBRA. This program provides continuation of health coverage if certain events cause people to lose their health coverage.

  1. What Is COBRA?

    • COBRA is a federal program whereby qualified beneficiaries become eligible for continuing health coverage because they would otherwise lose their health coverage as a result of a qualifying event. Continuation coverage must be identical to the coverage received by people who are similarly situated in terms of job status and position and who have not experienced a "qualifying event." A qualifying event is a federally designated event that results in the termination of your health care coverage. Continuation coverage continues for up to 36 months following the date of the qualifying event depending on certain situations. People who receive COBRA benefits must pay a premium for the coverage, which is not to exceed 102 percent of the original premium.

    Who Is a COBRA Qualified Beneficiary?

    • People who qualify for COBRA are called "COBRA qualified beneficiaries." They include the employee who participates in the health plan and her spouse and dependent children. A child born after the qualifying event may be considered a qualifying beneficiary.

    What are COBRA Qualifying Events?

    • A qualifying event under COBRA results in the loss of your health coverage and entitles you to coverage. The following events are considered qualifying events under COBRA for covered employees: death, termination of employment or reduction of hours, divorce or legal separation, receipt of Social Security benefits, cessation of a dependent child's coverage under the general requirements of the health plan.

    Which Employers Must Offer COBRA?

    • Employers that employ fewer than 20 employees on a typical business day during the preceding calendar year are not required to offer COBRA continuing coverage, even if a qualifying event occurs.

    Does COBRA Apply When an Employer Terminates a Health Plan?

    • An employer terminating a health plan is not designated as a qualifying event under COBRA. Accordingly, employees affected by the termination of a health plan would not be considered qualified beneficiaries and would not be eligible for COBRA.

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