Guidelines for Cobra

The Consolidated Omnibus Budget Reconciliation Act (COBRA) provides the option for temporary, continuous group health insurance coverage to employees, spouses, former spouses and dependent children after certain qualifying events. In most cases, employers with more than 20 employees are required to offer COBRA to employees who otherwise may lose coverage. Examine all options before electing COBRA, such as special enrollment in a spouses plan, an individual plan (if eligible) or a state plan (if eligible).

Eligibility

• According to 2006 COBRA guidelines, the group plan must be covered by COBRA, there must be a qualifying event and you must be a qualified beneficiary for that event. Qualifying events comprise loss of employment (except for gross misconduct), reduced hours, death of a covered employee, divorce, legal separation, covered employee becomes eligible for Medicare or a child loses dependent status.

Election

• Upon enrollment in the group health insurance plan, employers are required to provide a summary plan description within 60 days and a general notice describing COBRA rights within 90 days. Employers are required to notify the plan no later than 30 days after a qualifying event occurs, the plan then must provide a COBRA election notice within 14 days. The beneficiary has 60 days to enroll in the COBRA plan. Beneficiaries can elect independently whether or not to continue coverage. For example, a spouse may enroll, but the employee is not required to. If a beneficiary waives enrollment initially, the waiver can be revoked within the 60-day election period. A break in coverage of more than 63 days will result in a pre-existing exclusion period on future health insurance plans.

Benefits

• The benefits provided under COBRA coverage must be indistinguishable from active employee coverage including open enrollment options, co-payments, deductibles and limits. COBRA provides coverage for a limited period of time, depending on the type of qualifying event. Extension of coverage is available in certain situations such as disability and other qualifying events. Early termination can occur for non-payment of premium, discontinuation of the group plan, beneficiary is covered under another group or misconduct such as fraud. COBRA group health coverage may be provided under the Family and Medical Leave Act in certain situations.

Premium

• The employee is responsible to pay the entire premium in addition to a 2 percent administration fee. Often, the cost of COBRA coverage is higher since most employers pay part, or all, of the premium. However, COBRA coverage is frequently less expensive then enrolling in an individual plan. The plan must allow for a monthly payment and can offer weekly or quarterly payments. Beneficiaries are not required to submit premiums with the election form, but payment is required within 45 days. Failure to do so will result in the loss of all COBRA rights. The plan must provide a 30-day grace period for payment of premiums. Federal tax credit and/or subsidy is available to those who are eligible.