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The COBRA Act

The Consolidated Omnibus Budget Reconciliation Act, often referred to as COBRA, gives some workers who are no longer eligible for health insurance through an employer's group plan the option to continue their existing coverage for a limited time. With the COBRA Act, people who are temporarily unemployed, changing jobs or working reduced hours do not have to lose their health benefits.

  1. History

    • The COBRA Act was passed in 1985 and enacted in 1986, and the law has been amended many times since. The American Recovery and Reinvestment Act of 2009 (ARRA) extends COBRA benefits for some people who lost their jobs during the financial crisis that began in 2008.

    Coverage

    • Most employers with at least 20 workers who offer group health insurance are covered by COBRA. The COBRA Act allows for continuation of coverage for a qualified employee, his spouse or former spouse and dependent children who would lose coverage from the group health plan.

    Qualifying Events

    • An employee who quits or is terminated for any reason other than gross misconduct, or has her number of work hours reduced, is eligible for COBRA coverage. If the employee should die, get divorced or become eligible for Medicare, her spouse or former spouse and dependents can continue insurance coverage through COBRA. A child who once qualified as a dependent but has lost that status can also obtain coverage. Workers and their families are only eligible for COBRA if a qualifying event would cause them to lose insurance coverage.

    Duration

    • The length of time for COBRA coverage depends on the type of qualifying event and when it occurred. The COBRA Act establishes maximums for coverage duration, but health plans can opt to extend the benefits. For a termination or reduction of hours, the employee and his family can continue coverage for 18 months. For divorce and other qualifying events, the dependents or spouses can obtain COBRA benefits for 36 months.

    Considerations

    • Under the COBRA Act, the employee is responsible for the full cost of health insurance coverage. Since many employers contribute to the costs of group health care for its employees, the individual will likely have to pay more for continued coverage. However, coverage through COBRA is often less expensive than purchasing an individual health plan, according to the U.S. Department of Labor. Under ARRA, qualifying workers who lost their jobs between Sept. 1, 2008 and May 31, 2010 pay only 35 percent of COBRA premiums; the remainder of the cost is paid in the form of a tax credit to the insurance provider.

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