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COBRA Insurance Rules & Regulations

Workers faced with lost hours or jobs can also face the loss of their health care benefits. The Consolidated Omnibus Budget Reconciliation Act, commonly known as COBRA, passed by the United States Congress in 1986, allows workers to extend coverage of their group health care plan when reducing hours to part-time or upon termination from a job. The Employee Benefits Security Administration, or EBSA, defines who can qualify, the length of coverage and the amount plan administrators can charge for premiums.

  1. COBRA Eligibility

    • The EBSA offers COBRA eligibility to workers enrolled in a group health plan that continues to cover active employees. Workers can elect to extend coverage through COBRA after a qualifying event, such as loss of employment or reduction of hours. Loss of employment can include events such as resignation or termination. Workers can extend coverage for all persons covered by the group plan, including themselves, dependent children and spouses or former spouses. Children born during COBRA coverage can also qualify for benefits.

    Employer and Plan Administrator Requirements

    • Employers are required to notify health insurance administers within a 30-day period of an event that qualifies an employee for COBRA. Plan administers must send an election notice to the employee within 14 days, explaining eligibility and application requirements.

    Process

    • Upon receiving an election notice from a plan administer, the individual must apply for COBRA coverage within 60 days or lose their eligibility. Persons eligible for COBRA can elect to extend coverage individually, or the spouse of an eligible participant can elect to extend coverage for all qualified family members. Upon electing to extend coverage, participants have 45 days to pay the first premium. Employers that contribute to the cost of health care insurance are not required to continue their contribution under COBRA. Plan administrators can charge COBRA participants up to 100 percent of the insurance premium and an administration fee up to 2 percent.

    Coverage

    • Insurance administrators must offer the same coverage to COBRA participants as other, non-COBRA, participants, as established in the plan guidelines. When plan benefits change for employed participants, the changes will also affect COBRA participants. Plan administrators cannot change coverage based solely on COBRA participation. Open enrollment rules that apply to employed plan participants must also apply to COBRA participants.

    Extension of Benefits

    • If a COBRA participant experiences another qualifying event during their coverage period, they might qualify for an extension of coverage for another 18 months. Persons who suffer a disability during their COBRA coverage can also apply for an extension. They must submit proof in the form of a Social Security Administration ruling stating that the disability occurred during the initial 60 days of COBRA coverage. Disability extensions also require the participant to send the Social Security Administration ruling to the plan administrator before the expiration of COBRA coverage. Those who qualify can receive up to 11 more months of COBRA coverage, for themselves and participating COBRA family members. Plan administrators can charge up to 150 percent of the coverage premium to participants who extend their initial COBRA coverage.

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