COBRA Rights
When an employee is separated from service due to layoffs, a job change or firing, that employee's eligibility for employer provided health insurance benefits does not necessarily end after his last day at work. COBRA regulations require certain employers to allow former employees and immediate family members to continue their health insurance coverage, albeit at their own expense, for a limited time after separation from employment or after access to coverage ends due to a qualifying event.
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Features
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COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is Federeal legislation passed in 1986 that, among other things, required most group health insurance plans to make available temporary group health benefits to employees or their qualifying dependents who no longer qualify for coverage under the employer's group health insurance plan. Events that would qualify employees or their dependents for continuation of coverage under COBRA include termination or reduction in work hours, death of a covered employee, divorce or legal separation from an employee or the loss of a child's dependent status.
COBRA rights are generally extended to all employees covered by group health plans in public or private organizations that employ at least 20 employees. COBRA does not apply to federal government employees and certain religious organizations.
Employer Responisibility
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When an employee, spouse or dependent of an organization subject to COBRA experiences a qualifying event, the employer is responsible for informing the employee of her right to continue coverage under the employer's group health insurance plan. In instances of divorce, legal separation or other events outside of the employer's control, it is up to the employee to inform the employer of the event. The employee or other covered individual has 60 days after notification to inform the employer whether she intends to continue coverage.
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COBRA Costs
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Employers can, and usually do, require individuals to pay the entire cost of coverage plus an administrative fee. However, this cost cannot exceed 102 percent of the employer's cost to continue coverage. While coverage can be expensive, the advantage is that the employee pays group coverage rates, which, depending on the circumstances, can be less than rates for individual coverage. It also allows individuals to continue coverage regardless of pre-existing conditions.
COBRA Duration
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COBRA gives covered employees, spouses and dependents the right to coverage for a period of 18 to 36 months. The duration of coverage depends upon the qualifying event. Employees who are terminated or have their work hours reduced are entitled to coverage for 18 months.
Employees who became entitled to Medicare less than 18 months before termination, retirement or other qualifying event are entitled to coverage for their spouse and dependents for up to 36 months after the event. Qualified beneficiaries are entitled to coverage for 36 months after all other qualifying events.
Considerations
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Employers can deny an employee COBRA coverage for a limited number of reasons. Employees dismissed for gross misconduct do not qualify for coverage. After electing to continue coverage an employee can be disqualified after not paying premiums in a timely manner, becoming eligible for Medicare coverage or coverage under another group health insurance plan or violating the rules and regulations of the insurance plan such as in cases of fraud. Additionally, if the employer ceases to provide health insurance to all employees or goes out of business, COBRA coverage is no longer required.
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