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What is COBRA?

What is COBRA?

COBRA, the Consolidated Omnibus Budget Reconciliation Act, gives workers who lose their health benefits the right to choose to continue group health benefits provided by their plan under certain circumstances.

The employer will send an election notice within 14 days after the employee’s last day on the health insurance plan. The employee will then have 60 days to decide whether to elect COBRA continuation coverage. The employee will then have 45 days after electing coverage to pay the initial premium. Expect to pay the total premium (the employer + employee contribution) plus 2% for administration. Also, another important note is that the premiums are not tax deductible, like they are when they are deducted from payroll.

There are certain qualifying events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.

Qualifying Events for Employees

  • Voluntary or involuntary termination of employment for reasons other than gross misconduct
  • Reduction in the number of hours of employment

Qualifying Events for Spouses

  • Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
  • Reduction in the hours worked by the covered employee
  • Covered employee’s becoming entitled to Medicare
  • Divorce or legal separation of the covered employee
  • Death of the covered employee

Qualifying Events for Dependent Children

  • Loss of dependent child status under the plan rules
  • Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
  • Reduction in the hours worked by the covered employee
  • Covered employee’s becoming entitled to Medicare
  • Divorce or legal separation of the covered employee
  • Death of the covered employee