What Is COBRA, And How Does It Work?
COBRA, short for the Consolidated Omnibus Budget Reconciliation Act of 1985, is a law that allows for the temporary extension of group health plan coverage in specific situations. It includes detailed regulations and FAQs but also involves many special rules that affect its administration. COBRA is not an insurance policy itself but a right triggered by certain events that allow individuals to continue their existing coverage.Which Plans Are Required To Comply With COBRA?
Any group health plan maintained by an employer with 20 or more employees must comply with COBRA. This includes medical, dental, and vision plans, as well as other plans that provide health care, such as flexible health spending accounts and some employee assistance programs. Exceptions exist for governmental and church plans.What Events Trigger COBRA Rights?
Qualifying events that trigger COBRA rights include termination of employment, reduction in work hours, divorce or legal separation, death of the employee, loss of dependent status, and entitlement to Medicare. However, the event must result in a loss of coverage to trigger COBRA rights.Who Is Eligible For COBRA Coverage?
Eligible individuals include employees, their spouses, and dependents who were covered under the group health plan the day before the qualifying event. These individuals, known as qualified beneficiaries, have an independent right to elect COBRA coverage.How Much Does Continuation Coverage Cost For A Qualified Beneficiary?
Qualified beneficiaries must pay the full premium cost of the coverage, which includes both the employee and employer portions. Additionally, they may be charged an administrative fee of up to 2%. Payments are typically made on an after-tax basis through checks or bank payments.How Long Does COBRA Continuation Coverage Last?
COBRA coverage is a temporary extension, with a maximum period of 18 months for termination of employment or reduction in hours and up to 36 months for other qualifying events like divorce or the death of an employee. The 18-month maximum coverage period may be extended if a qualified beneficiary becomes disabled or if a second qualifying event occurs.What Must An Employer Do To Set Up COBRA For A Former Employee?
Employers must have written COBRA procedures and can hire a third-party administrator or manage it in-house. They must provide several notices, including an initial notice, qualifying event notice, and early termination notice. Employers must also ensure that qualified beneficiaries receive the same information and opportunities as active employees.What Responsibilities Do Employees Or Qualified Beneficiaries Have Under COBRA?
Qualified beneficiaries must notify the plan administrator of specific qualifying events, such as divorce, within 60 days. They need to elect COBRA within 60 days of receiving the qualifying event notice and make the first premium payment within 45 days of election. Timely payment of on-going premiums and communication with the COBRA administrator are crucial for maintaining coverage.How Do State Laws Impact COBRA?
State laws, often referred to as “mini COBRA” laws, can supplement federal COBRA by filling in gaps or applying to smaller employers not covered by federal law. These laws usually apply to insurers rather than employers and provide additional continuation coverage options.What Are The Penalties For Failing To Comply With COBRA?
Failure to comply with COBRA can result in various penalties, including an excise tax of $100 per day, statutory penalties assessed by courts, and potential lawsuits. Employers must ensure they meet all minimum requirements and seek legal counsel for any complex situations to avoid these penalties. 
