COBRA Facts, Figures and Finances

Throughout a career, workers will face multiple life events, job changes or even job losses. A law enacted in 1986 helps workers and their families keep their group health coverage during times of voluntary or involuntary job loss, reduction in the hours worked, transition between jobs and in certain other cases.

The law gives workers who lose their health benefits the right to choose to continue group health benefits provided by the plan under certain circumstances.

The law generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

It applies to plans in the private sector and those sponsored by state and local governments. Provisions of COBRA covering state and local government plans are administered by the Department of Health and Human Services.

Several events that can cause workers and their family members to lose group health coverage may result in the right to Continuation coverage. These include:

Voluntary or involuntary termination of the covered employee for reasons other than gross misconduct Reduced hours of work for the covered employee

Covered employee becoming entitled to Medicare

Divorce or legal separation of a covered employee

Death of a covered employee

Loss of status as a dependent child under plan rules

Under the law, the employee or family member may qualify to keep their group health plan benefits for a set period of time, depending on the reason for losing the health coverage.

The following represents some basic information on periods of continuation coverage:

18* Months Continued Coverage:

For Employees, Spouses & Dependents if Qualifying Event is due to Termination or Reduced Hours.

36 Months Continued Coverage: For Spouse or Dependent Child if an Employee is entitled to Medicare or Divorce/Legal Separation or an Employee Dies.

36 Months Continued Coverage:

For a Dependent Child that reaches age of Majority.

*This 18-month period may be extended for all qualified beneficiaries if certain conditions are met in cases where a qualified beneficiary is determined to be disabled for purposes of the COBRA law. However, the law also provides that your continuation coverage may be cut short in certain cases.

Notification Requirements

-An initial notice must be furnished to covered employees and spouses, at the time coverage under the plan commences, informing them of their rights under COBRA and describing provisions of the law.

-COBRA information also is required to be contained in the plan’s summary plan description (SPD) When the plan administrator is notified that a qualifying event has happened, it must in turn notify each qualified beneficiary of the right to choose continuation coverage.

-COBRA allows at least 60 days from the date the election notice is provided to inform the plan administrator that the qualified beneficiary wants to elect continuation coverage.

-The covered employee or a family member has the responsibility to inform the plan administrator of a divorce, legal separation, disability or a child losing dependent status under the plan

-Employers have a responsibility to notify the plan administrator of the employee’s death, termination of employment or reduction in hours, or Medicare entitlement

-If covered individuals change their marital status, or their spouses have changed addresses, they should notify the plan administrator

Premium Payments

-Qualified individuals may be required to pay the entire premium for coverage up to 102% of the cost to the plan. Premiums may be higher for persons exercising the disability provisions of COBRA.

-Failure to make timely payments may result in loss of coverage

-Premiums may be increased by the plan; however, premiums generally must be set in advance of each 12-month premium cycle

-Individuals subject to continuation coverage may be responsible for paying all costs related to deductibles, and may be subject to catastrophic and other benefit limits

The American Recovery & Rinvestment Act of 2009 will modify above rules for the near future are as follows:

HEALTH INSURANCE ASSISTANCE

Premium Subsidies for COBRA Continuation Coverage for Unemployed Workers. Recession-related job loss threatens health coverage for many families. To help people maintain coverage, the bill provides a 65% subsidy for COBRA continuation premiums for up to 9 months for workers who have been involuntarily terminated, and for their families. This subsidy also applies to health care continuation coverage if required by states for small employers. With COBRA premiums averaging more than $1000 a month, this assistance is vitally important. To qualify for premium assistance, a worker must be involuntarily terminated between September 1, 2008 and December 31, 2009. The subsidy would terminate upon offer of any new employer-sponsored health care coverage or Medicare eligibility. Workers who were involuntarily terminated between September 1, 2008 and enactment, but failed to initially elect COBRA because it was unaffordable, would be given an additional 60 days to elect COBRA and receive the subsidy. To ensure that this assistance is targeted at workers who are most in need, participants must attest that their same year income will not exceed $125,000 for individuals and $250,000 for families. The Joint Committee on Taxation estimates that this provision would help 7 million people maintain their health insurance by providing a vital bridge for workers who have been forced out of their jobs in this recession. This provision is estimated to cost $24.7 billion