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Reasons That COBRA Terminates

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, became law in 1986. The act allows employees who were covered under a group health plan to continue their coverage for a set length of time by paying the premiums that would normally be split between the employee and his employer. This is typically more expensive than the payments the employee was making, since he is now absorbing the full cost, but may be less costly than an individual health plan. Coverage may terminate due to five primary factors.

  1. Participant Fails to Pay Premiums

    • Coverage depends on the beneficiary remitting timely payments for her premiums. The initial payment must be sent no more than 45 days after electing COBRA coverage. This first payment must be sufficient to pay the premium from the date coverage was lost to the date COBRA coverage was elected. All plans must allow monthly premium payments, and may permit quarterly or weekly payments. The plan must provide a grace period of no less than 30 days for premium payments.

    Employer Eliminates Health Insurance

    • If a company closes for any reason, including bankruptcy, and is therefore no longer maintaining a group health plan, COBRA coverage is unavailable. However, if the company offers a different plan, such as through a reorganization, participants may be able to obtain COBRA coverage under the new plan.

    Participant Joins Another Group Health Plan

    • If the participant joins another group health plan after electing COBRA coverage and the new plan does not exclude pre-existing conditions, COBRA can be canceled. If the new group plan is obtained before COBRA coverage is elected, COBRA may not be canceled.

    Medicare Eligibility

    • If the participant becomes eligible for Medicare after electing COBRA coverage, COBRA may be discontinued. If the participant has Medicare coverage before opting for COBRA coverage, COBRA may not be canceled.

    Coverage Period Ends

    • The maximum length of time COBRA must be offered is 18 months. An employer may choose a plan that provides a longer period of coverage. A second event meeting the qualifications for COBRA coverage that occurs during the initial coverage period may entitle the participant to receive up to 36 months of coverage. For a participant who becomes disabled within 60 days of coverage under COBRA and submits a letter written by the Social Security Administration verifying the disability, COBRA may be extended by 11 months. The letter from the SSA must be sent to the plan no more than 60 days from its receipt and must be sent before the 18-month time period expires.

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