What Is the COBRA Extended Health Plan?

The Consolidated Omnibus Budget Reconciliation Act is a federal law that assists employees who lose their job and, therefore, also lose their health insurance coverage. COBRA allows access to health insurance at group rates for a maximum of 18 months, or until the former employee is able to obtain health insurance under another policy.

Who Qualifies

• According to the U.S. Department of Labor website, if an employer with 20 or more employees provides group health insurance, then the employer must also provide its employees the option of temporary health insurance after a "qualifying event" such as the employee being laid off. The employee must be enrolled in the employer's plan, and the coverage must still be available to current, active employees. COBRA coverage becomes available to an employee when a qualifying event cause the employee to lose health insurance coverage.

Qualifying Events.

• Qualifying events differ for an employee, their spouse and their dependent children. For an employee, loss of employment for any reason except gross misconduct would be a qualifying event. For a spouse, loss of employment by the employee plus divorce or separation from the employee or the death of the employee would be a qualifying event. For dependent children, the same events as described above including the depending child reaching an age when they no longer would qualify as a dependent child.

Notification of Eligibility

• When an employee no longer qualifies for the employer's group plan, the employer must provide notification, within 30 days, to its COBRA plan administrator. The plan administrator then provides notification to the employee within 14 days. This notification will include information regarding qualification for COBRA and what the employee must do to enroll. If COBRA coverage is elected by the former employee, health insurance coverage begins the day it would have been lost, even if that is several weeks prior to the employee enrolling in COBRA.

Payment for COBRA

• COBRA allows the former employee to continue her health insurance coverage at the former employer's group rates. She is now responsible for paying the entire premium, plus a 2 percent administrative fee. This could be significantly more expensive than she was paying when employed, if her employer had been paying part of the insurance premium.