The Federal COBRA Act

When people lose their jobs in the United States, that doesn't mean they automatically lose their insurance benefits. The federal government in 1986 passed the Consolidated Omnibus Budget Reconciliation Act, also known as COBRA. The federal act allows U.S. workers to continue their insurance plans after their employers' fire or lay them off.

Function

• COBRA amended the Employee Retirement Income Security Act, the Public Service Act and the Internal Revenue Code to extend coverage for people who might otherwise lose it. Employees, retirees, former spouses and dependent children can continue paying their insurance premiums at group rates for 18 months for most recipients. The act, along with providing for the extended health insurance, outlines how people can elect the coverage. The legislation also sets timelines for notices and electing COBRA.

Eligibility

• COBRA uses three criteria to determine someone's eligibility for continued coverage: the type of insurance plan, qualifying beneficiaries and qualifying events. COBRA covers group health plans at businesses with 20 or more full- and part-time employees working at least half of the typical business days in the previous year. Qualified beneficiaries are people who are employees or retirees, their spouses or their dependent children the day before a qualifying event. Qualifying events include employees' terminations or reductions in hours. For spouses, qualifying events also include divorces, deaths or eligibility for Medicare begins. And dependent children also become eligible for COBRA for those same reasons, as well as the loss of dependent child status under their parents' insurance plans.

Electing Coverage

• In order for employees to be eligible for COBRA, they must have had an active health plan with their employers when they lost their jobs or undergo another qualifying event. Employers need to notify insurance plan administrators of a plan cut within 30 days of it happening. Qualified beneficiaries have 60 days to notify plan administrators of an insurance loss. Once administrators have received notices, they have 14 days to send COBRA paperwork to the people who lost the coverage. Those people then have 60 days to decide whether to elect COBRA, and another 45 days to pay the first premium. People who waive coverage can revoke it and accept COBRA as long as they do so within 60 days after receiving the paperwork.

Coverage Length

• COBRA's coverage lasts for 18 months in most cases, but people who become disabled can receive extensions. Coverage can continue if the Social Security Administration determines a COBRA recipient became disabled within the first 60 days of receiving the continued insurance. People who become disabled must send a copy of the Social Security Administration's ruling to their plan providers before the 18-month coverage ends. People who meet those requirements can receive an additional 11 months of COBRA for everyone on their plans.

Premiums

• COBRA recipients might have to pay up to 102 percent of their insurance plans' premiums. People who claim disabilities might have to pay more. Not paying the premiums, like any other insurance plans, results in losing it. People who receive COBRA coverage might also have to pay all costs for deductibles. The plans might set limits for catastrophic claims and other benefits.