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COBRA Insurance Rules for Employees

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed by Congress in 1986. Laid-off employees may continue their health insurance coverage, usually for up to 18 months, under COBRA. The former employee pays up to 102 percent of the employer's costs for continued coverage.

  1. Qualifying Event

    • An individual's access to COBRA coverage requires a qualifying event. Termination from the employer, whether voluntary or involuntary, usually qualifies the former employee for COBRA coverage. Gross misconduct, such as theft or violence in the workplace, may prevent the employee from accessing COBRA coverage. An employee who elects or accepts reduced hours from the employer may also qualify for COBRA.

    National and Mini-COBRA Laws

    • COBRA requires that organizations employing 20 or more people at least half of the year offer COBRA coverage. Terminated and retired employees must receive notice of the ability to apply for continued health insurance. Qualified beneficiaries, such as spouses of terminated employees or divorced spouses of employees, may receive health insurance under COBRA. Children born to or adopted by the former employee during COBRA coverage may receive insurance coverage. State laws address COBRA coverage. In some states, small employers with as few as two employees must offer continuing coverage.

    Eligibility

    • Eligibility for COBRA coverage requires that the individual was covered under the employer's plan. A former employee without coverage under the employer's plan doesn't qualify for COBRA coverage later. The employer notifies health insurance plan administrator of the former employee's qualifying event -- such as termination, death, access to Medicare or reduction of hours -- within 30 days. The plan administrator sends an election notice to the former employee or beneficiary of the right to pay for health insurance under COBRA. After receipt of the election notice, the individual has up to 45 days to pay for the insurance.

    Claims Payments

    • Former employees and others electing COBRA coverage may file claims according to the insurance plan's rules and terms. If the plan denies a claim during a COBRA coverage period, a written explanation of the reasons for denying the claim must be provided to the insured. The plan must also provide information about how to appeal the denial. The individual has 60 days to appeal a denied claim. The insurance plan's administration then overturns or upholds the denial within 60 days.

    Trade Adjustment Assistant Reform Act of 2002

    • Workers who've lost a job because of overseas outsourcing or trade may receive help paying for COBRA costs, according to author Mark Miller of "The Hard Times Guide to Retirement Security: Practical Strategies for Money." Under the Trade Adjustment Assistance Reform Act of 2002, terminated workers may be eligible to receive monthly payments of up to 80 percent of COBRA costs or a tax credit to offset these costs for up to three years.

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