How Can an Employer Go Wrong Applying COBRA?

Complying with COBRA laws can be tricky.

When it's necessary to lay off an employee, one benefit required by law is the continuation of group health insurance coverage. This is known as COBRA. Employers make a number of common mistakes in trying to comply with the laws governing the implementation of COBRA.

Assuming COBRA Doesn't Apply

Any business with a group health plan and 20 or more employees -- part time or full time -- is covered by COBRA. This is true for both private and public businesses. Companies partially held by the primary company or subsidiaries of the primary company also count toward the employee total. State-specific regulations about COBRA often apply to companies with as few as two employees.

Not Making COBRA Available

Many circumstances trigger COBRA coverage. For example, in any termination except for gross misconduct, the employee, spouse and dependent children are eligible for COBRA. If an employee's hours are reduced so that he no longer qualifies for health insurance, then the employee, spouse and dependent children are all covered by COBRA. If a covered employee dies or is divorced, the spouse and dependent children are eligible for COBRA.

Reducing Benefits

Some employers try to decrease benefits for employees on COBRA or fail to provide it for the required amount of time. Benefits must be the same as those offered to active employees, and must be offered for 18 months after the qualifying termination or reduction in hours, and 36 months for other qualifying events.

References

• Energi: Avoiding the Ten Most Common COBRA Mistakes