COBRA Questions Answered

10 Common COBRA Questions

1: What is COBRA continuation coverage?

The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) amended the Public Health Service Act, the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA) to require employers with 20 or more employees to provide temporary continuation of group health coverage in certain situations where it would otherwise be terminated.

2: Who is a qualified COBRA beneficiary?

A qualified beneficiary is an individual who is entitled to COBRA continuation coverage because he or she was covered by a group health plan on the day before a “qualifying event.” Depending on the circumstances, the following individuals may be qualified beneficiaries: a "covered employee" (a term that includes active employees, terminated employees and retirees); a covered employee's spouse and dependent children; any child born to or placed for adoption with a covered employee during the period of COBRA coverage; agents; self-employed individuals; independent contractors and their employees; directors of the employer; and, for public sector group health plans, political appointees and elected officials.

3: What is a qualifying event?

Qualifying events are certain events that would cause an individual to lose health coverage under a group health plan. The type of qualifying event will determine who the qualified beneficiaries are and how long they will be entitled to COBRA coverage.

The following are qualifying events: the death of the covered employee; a covered employee's termination of employment or reduction of the hours of employment; the covered employee becoming entitled to Medicare; divorce or legal separation from the covered employee; or a dependent child ceasing to be a dependent under the generally applicable requirements of the plan.

4: How long does COBRA last?

Assuming one pays all required premiums, COBRA coverage starts on the date of the qualifying event, and the length of the period of COBRA coverage will depend on the type of qualifying event which caused the qualified beneficiary to lose group health plan coverage.

For “covered employees,” the only qualifying event is termination of employment (whether the termination is voluntary or involuntary) including by retirement, or reduction of employment hours. In that case, COBRA lasts for eighteen months.

If the qualifying event is the death of the covered employee, divorce or legal separation of the covered employee from the covered employee’s spouse, or the covered employee becoming entitled to Medicare, COBRA for the spouse or dependent child lasts for 36 months.

5: How long does the employer have to give COBRA notice when there is a qualifying event?

Generally the employer has 44 days to provide COBRA notice.

Separate requirements apply to the employer and the group health plan administrator. An employer that is subject to COBRA requirements is required to notify its group health plan administrator within 30 days after an employee’s employment is terminated, or employment hours are reduced. Within 14 days of that notification, the plan administrator is required to notify the individual of his or her COBRA rights. If the employer also is the plan administrator and issues COBRA notices directly, the employer has the entire 44-day period in which to issue a COBRA election notice.

6: When do I have an obligation to notify my plan administrator that I have had a qualifying event?

If you become divorced or legally separated from the covered employee, or if a dependent child no longer meets the requirement to be a covered dependent (usually by reaching a specified age), the covered employee or qualified beneficiary is responsible for notifying the plan administrator of the qualifying event within 60 days after the date of the qualifying event.

7: How do I elect COBRA?

Qualified beneficiaries must notify the plan administer of their election according to the instructions laid out in the election notice. Qualified beneficiaries must be given an election period of at least 60 days during which each qualified beneficiary may choose whether to elect COBRA coverage. This period is measured from the later of the date of the qualifying event or the date the COBRA election notice is provided. COBRA coverage is retroactive if elected and paid for by the qualified beneficiary.

8: How much will I pay for COBRA coverage?

Typically it COBRA coverage will cost 102% of the total cost of insurance, including the employee and employer paid portions.

Usually the beneficiary is required to pay the entire cost of COBRA coverage, although a few employers choose to subsidize COBRA. However, in the likely event that the employer chooses not to subsidize COBRA, the COBRA premium cannot exceed 100 percent of the cost of the group health plan for similarly situated individuals who have not incurred a qualifying event, including both the portion paid by employees and any portion paid by the employer prior to the qualifying event, plus an additional 2 percent for administrative costs.

Please note the employer may charge up to 150 percent for an 11 month disability extension of COBRA coverage.

9: What does a COBRA notice include?

A notice of COBRA rights generally includes the following information:

A written explanation of the procedures for electing COBRA,
The date by which the election must be made,
How to notify the plan administrator of the election,
The date COBRA coverage will begin,
The maximum period of continuation coverage,
The monthly premium amount,
The due date for the monthly payments,
Any applicable premium amount due for a retroactive period of coverage,
The address to which to send premium payments,
A qualified beneficiary’s rights and obligations with respect to extensions of COBRA coverage, and
The bases for early termination of the period of COBRA coverage.

10: How do I pay make COBRA payments?

The COBRA election notice should contain the address to which premium payments should be sent and should be provided by the employer or group health plan administrator along with the amount of the premium due and its due date.

A group health plan cannot require payment for any period of COBRA continuation coverage earlier than 45 days after the day on which the qualified beneficiary made the initial election for continuation coverage.

Not including the first premium payments, all other premium payments must be made within 30 days of the due date (due date is set by the group health plan).

This information is taken from the Centers for Medicare and Medicaid Services, The Center for Consumer Information & Insurance Oversight, COBRA Continuation Coverage Questions and Answers available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Other-Insurance-Protections/cobra_qna