How Long Can a Terminated Employee Participate in Cobra?

COBRA stands for Consolidated Omnibus Budget Reconciliation Act and provides terminated employees and their dependents with access to group health coverage following a job termination. The act is only applicable if the employer was providing a group health insurance policy. The maximum duration of COBRA coverage varies depending on whether the employee or a dependent is covered, as well as on disability status of the covered individual.

Definition

• COBRA or Consolidated Omnibus Budget Reconciliation Act is landmark legislation passed by Congress in 1986. The act provides former employees, including retirees, spouses, former spouses and dependents of former employees with health-care coverage after the termination of employment following a qualifying event. The act intends to reduce the financial and psychological burden of finding new health insurance after a job loss. Although the cost of health care for the individual usually goes up when switching from a partially sponsored group health plan to COBRA, this increase is often less than what the individual would pay if he or she had to purchase a new, individual insurance policy.

Applicability

• COBRA coverage applies only if the employer offers a group health plan and has 20 or more employees. The employer can be a for-profit company, a not-for-profit corporation or a local or federal agency.

Qualified Beneficiaries

• A qualified beneficiary is a full or part-time employee or his or her spouse or children who was/were covered by the employer's group health insurance plan at the time of the severance. Qualifying events include voluntary or involuntary termination of employment but exclude termination due to gross misconduct. If the health plan is only available to employees who work more than a certain number of hours per week or month, and a reduction of the employee's work hours leads to loss of health insurance coverage, this too is a qualifying event.

Costs

• Most employers who offer a group health plan help their employees save in two ways. First, employers get significantly cheaper rates for health insurance because of volume discounts. Secondly, most employers pay a portion of the insurance premiums. With COBRA coverage, the individual must pay the entire bill.

Duration

• Employees and their dependents can participate in COBRA for up to 18 months following a termination or reduction in work hours. If the employee is disabled during the first 60 days of COBRA coverage, the coverage will last up to 29 months. Spouses and dependents, such as children, who lose coverage as a result of the employee's death, a divorce or legal separation are covered for up to 36 months.