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Health insurance is one of the most important benefits employers can provide for their employees. COBRA, or Consolidated Omnibus Budget Reconciliation Act of 1985, is a federal law that requires employers of 20 or more employees who offer health care benefits to offer the option of continuing this coverage to certain individuals. This enables employees to remain on their health plan for limited periods of time under specific circumstances, including job loss, a reduction in hours worked, death, and other life events.

Many employers struggle to understand the regulations governing COBRA as well as COBRA-like laws that individual states may apply. However, failure to comply with these rules can lead to significant penalties for an employer, making it necessary to familiarize themselves with the basics of the law, including employee eligibility, benefits covered by COBRA health insurance, and the events that trigger COBRA coverage.

What Is COBRA Health Insurance?

COBRA health insurance, originally enacted in 1986 as part of the larger Employee Retirement Income Security Act of 1974 (ERISA), offers certain employees the right to pay premiums and continue group health insurance coverage under certain circumstances. Prior to this, individuals who were on an employer-sponsored health plan immediately lost health insurance coverage when the qualifying employee terminated employment for any reason.

After COBRA was enacted, employees who left an employer-sponsored plan could choose to continue health insurance coverage for a prescribed period of time after leaving the company. This continuation is often significantly more expensive than the amount that active employees are required to pay for group health coverage since the employer usually pays part or all of the cost of employees’ coverage while they are employed. Under COBRA health insurance, the employer is no longer responsible for covering any part of this cost. It can all be charged to the individuals directly receiving the continuation coverage. COBRA coverage is typically offered to qualifying employees for a period of 18 to 36 months. Still, an individual’s eligibility for COBRA health insurance as well as the length of coverage both depends on specific qualifying events.

Eligibility for COBRA Coverage

Employers subject to COBRA who have a group health plan need to provide COBRA benefits to qualified beneficiaries. Any employees who are enrolled in an eligible group health plan and meet certain qualifying event requirements may be eligible for COBRA continuation coverage. A qualified beneficiary can include:

However, even if a business meets the 20-employee minimum, certain employees are not eligible for COBRA health insurance based on their failure to elect a qualifying plan, their reason for termination, or other extenuating circumstances. This can include:

Also, to be eligible for continuation coverage under COBRA health insurance, employees need to experience a qualifying event that causes the employee to lose group health coverage. Examples of these events include:

Qualifying events can also extend to an employee’s spouse or dependents if it results in a change in status for the entire family and affects the family’s ability to maintain health coverage.

Paying for COBRA Coverage

Employers are responsible for providing eligibility notification to qualifying individuals and making equivalent coverage available during the COBRA eligibility period. However, employers are not responsible for covering any part of the cost of this coverage, and the employee generally pays the total cost of the COBRA health insurance premiums. The law allows employers to charge 102 percent of the premium and keep the 2 percent to cover administrative costs. When an employee gets extended COBRA coverage due to disability, they can charge 150 percent of the premium for months 18 through 29. Also, if COBRA payments are paid late, employers are allowed to terminate coverage before the end of the standard COBRA eligibility period, providing a thirty-day grace period has been given.

Preventing Fines for Non-Compliance

While COBRA coverage can be beneficial for employees as it helps them bridge the health insurance gap in different circumstances, including a job loss, non-compliance with COBRA health insurance rules can be very expensive for employers. For example, penalties for failing to correct COBRA violations in a timely manner can be $100 per day or $2,500 per beneficiary affected by the rule violation.

To prevent the potential financial penalties for non-compliance and simplify the process of meeting COBRA requirements, employers can integrate proper technology-driven solutions. Such an approach can not only lessen the burden but also give employers time to focus on other pressing issues. Furthermore, today’s companies have to comply with an overwhelming number of regulations, and outsourcing unemployment claims management can help employers save time and money and ensure proper management of countless details and deadlines that can easily result in costly non-compliance.


Contact CCC to see how we can save your organization time and money.
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