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COBRA Continuation Requirements

The Consolidated Omnibus Budget Reconciliation Act allows certain employees and their families to continue their health insurance coverage under a former employer's plan. This allows an employee who has been laid off to keep up with coverage while he looks for a new job. The insured person must pay both the original amount plus any portion that the employer paid. This makes insurance under COBRA more expensive than the former plan, but less expensive than individual insurance.

  1. Plans Covered

    • Offering insurance continuation under COBRA is required for all employers with 20 or more employees. The law counts both full- and part-time employees with the number of hours worked by the part-time employee determining how much of a full-time equivalent they are. The employer must have had the 20 or more employees for more than 50 percent of the business days in the prior year. Employers with fewer than 20 employees do not have to maintain coverage under COBRA.

    Eligible Employees

    • COBRA is available to former employees who were covered under a company's group health care plan the day before a qualifying event occurs. If the employee's spouse and/or children were covered under the plan, they are also eligible for COBRA coverage. In some cases, non-employees who were enrolled in the plan are also covered, including independent contractors and corporate directors.

    Qualifying Events

    • COBRA coverage kicks in when a qualifying event happens to an employee. Qualifying events include quitting or being laid off from a job unless the termination was a result of the employee's gross negligence. They also include losing health insurance because an employee's hours have been reduced to the point where the company no longer offers health coverage. An employee's spouse and children can be covered in the case of legal separation or divorce (where they would otherwise lose coverage) or if the employee dies.

    Length of COBRA Coverage

    • The basic period of COBRA coverage is 18 months maximum. If the former employee starts a new job with a new health plan, COBRA coverage ends immediately. If the employee becomes disabled, coverage can extend a further 11 months. Plan administrators can charge up to 150 percent of the premium for this extension in coverage. It is possible to receive a total of 36 months of coverage if a further qualifying event occurs.

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