Extends medical coverage upon termination of coverage from an employer.
COBRA is the acronym used for the Consolidated Omnibus Reconciliation Act and the main portion of the act that affects you is that it extends medical coverage to employees and their dependents upon termination of coverage from an employer. There are a lot of details to this act and this page is only intended to give an overview on the most common situations.
When an employer has employee benefits and 20 or more employees including part-time employees for over 6 months of the previous calendar year, the employer or plan sponsor must offer COBRA to employees for the next calendar year. (For the purpose of counting employees, a full time employee would be one that qualifies for the benefit. If the requirement for having the benefit is 30 hours, then 2 employees working 15 hours each would equal a full time employee.) This law applies to all private sector employers except employers that are maintaining church plans are excluded. State and political subdivision are covered by parallel provisions in Title XXII of the Public Service Act.
Cobra allows an former employee or dependent to continue a benefit for up to 18 months, or in some cases, up to 36 months. The benefit is continued with the former employee or dependent paying the cost of the benefit plus a 2% administration fee.
There are six events that trigger COBRA (seven if you want to count bankruptcy, but we are not going into that one). They are:
The first three items the employer is going to be aware of, the second three items it is the employee's responsibility to notify the employer of the event and must be done within 60 days of the event.
A qualified beneficiary is someone who was covered by the benefit the day before the coverage ended and can be either the employee or a dependent. Each qualified beneficiary has the right to elect COBRA coverage independent of anyone else. So, a dependent can elect COBRA even if the employee doesn't.
There are several, some dealing with the notification and election process and others that deal with coverage time periods. Here is a brief look at each starting with the notification periods:
Note: The law does not require that coupons or billing notices be sent, it is the individuals responsibility to submit payments in a timely fashion.
Now the coverage time periods:
Sometimes there are multiple qualifying events, such as an employee terminates employment then 6 months later goes through a divorce. This would entitle any dependents that had the original 18 months of coverage an extension to a total of 36 months of coverage. It is important to know - all time periods start with the original qualifying event and at NO TIME can there ever be more than a total of 36 months of coverage.
Don't get bitten by this snake, Boulder Administration Service offers complete COBRA administration! So many of the companies that claim to administer COBRA only collect the payments. What they fail to do is send out the initial notification letters or even the qualifying event notice. They leave this up to the employer, who is often unaware that this needs to be done.
With our COBRA administration we perform all of the required steps to conform to the law, from the mailing of the initial notification, the COBRA event notice to the termination notice at the end of COBRA.
We will work with the employer to determine which of the employee benefits that they offer require COBRA administration. Then employer has to notify us of new enrollees in any plan requiring COBRA and any terminations of employees - we handle the rest of the COBRA requirements.