How Long for Cobra Insurance to Take Effect?

Group health insurance is offered by an employer to employees, making it easier for the employee to get access to health care. Certain employers are subject to COBRA coverage under provisions of the law. In the event a company closes down or goes into bankruptcy, the coverage under COBRA is no longer required.

History

• COBRA (Consolidated Omnibus Budget Reconciliation Act) was passed by Congress in 1986, according to the Department of Labor. This law provides continuous health care coverage when it might otherwise be terminated, and amends the Internal Revenue Code, Employee Retirement Income Security Act and the Public Health Service Act.

  COBRA provides temporary health insurance coverage at group rates to certain groups of retirees, former employees, spouses, dependent children and former spouses. This coverage is designed to become available only when coverage is lost because of specific "qualifying events." Once COBRA takes effect, the participant pays for the entire cost, where, under regular employer-provided insurance, the employer covered a portion and the participant covered the remaining portion.

Features

• Former employees are required to have participated in their employer's health insurance plan while working for that employer. Both employers and qualified beneficiaries have to notify the health plan administrator that a qualifying event has taken place. "Qualifying events" include: voluntary/involuntary termination of employment for any reason but gross misconduct and a reduction in the number of working hours (for employees).

  A qualifying event for spouses includes a voluntary or involuntary loss of spouse's employment for any reason except gross misconduct, a drop in the number of working hours for the covered employee, legal separation or divorce of the covered employee, the covered employee becomes eligible for Medicare or the covered employee dies.

  A qualifying event for dependent children can include the child's loss of dependent child status under the rules of the health care plan, a drop in the number of working hours for the covered employee, voluntary/involuntary loss of employment for any reason except gross misconduct, the covered employee is now eligible for Medicare, the covered employee dies, or the covered employee becomes legally separated or divorced from the spouse.

Identification

• Employers who employ 20 or more persons for more than 50 typical business days in the past calendar year are subject to COBRA. Both part-time and full-time employees are counted in this equation.

  Qualified beneficiaries are usually individuals who are covered by the employer's group health plan on the day before any qualifying event takes place. Some retirees, their spouses and dependent children may also qualify under the terms of COBRA. In addition, independent contractors, agents and company directors who participate in the group's health plan might also qualify as beneficiaries for COBRA coverage.

Facts About COBRA

• COBRA coverage starts on the date the qualifying event occurs, causing the loss of health care coverage. The beneficiaries are allowed up to 18 months of continuous coverage for some qualifying events, and 36 months for other qualifying events. After a second qualifying event takes place while the initial COBRA coverage is in effect, COBRA coverage can be extended for another 18 months. Employers are able to provide coverage under COBRA for a longer time period if they choose to do so.