Consolidated Omnibus Budget Reconciliation Act (COBRA) Insurance

Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), a covered group health insurance plan must offer an opportunity to continue health plan coverage to each qualified beneficiary who would otherwise lose coverage under the plan as a result of a qualifying event.

Common Mistake

• Failing to send appropriate COBRA notices, as required by law.

Same Coverage as for Active Employees

COBRA health insurance requires that coverage, in terms of benefits, deductibles, and coverage limits, be identical to similarly situated active plan participants. Changes in the plan for active participants (for example, increased deductibles, changes in coverage limits or benefits, termination of plan) also will affect those participating through COBRA.

Likewise, whenever an active employee can make changes in coverage or add dependents, such as at annual open enrollments, so can all qualified beneficiaries. All notices you provide to active employees should also be provided to all qualified beneficiaries.

Types of Health Plans Covered

Consolidated Omnibus Budget Reconciliation Act (COBRA) contains clear criteria to determine whether employees enrolled in your group health plan(s) are eligible for COBRA insurance coverage. Medical Spending Accounts (MSAs) and some region-specific group health plans require special consideration.

Employers Covered By COBRA

Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage applies to employers with 20 or more employees. However, calculating the number of employees can be a complex matter based on such issues as full- or part-time employment, changes in workforce numbers over time, and acquisition of other businesses.

Employees Covered By COBRA

Employees who are enrolled in your health care plan the day before a qualifying event are usually eligible for Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage.

Qualifying Events and Extent of Coverage

There are six specific events resulting in loss of health plan coverage that can trigger an employee's eligibility for Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage. It is important not only to be aware of the six events, but also to consider them in light of other conditions such as the occurrence of multiple qualifying events, the effects of business reorganizations, and the relationship between family and medical leaves and COBRA. Factors that can affect COBRA insurance coverage eligibility include:

• Divorce and remarriage
• Retirement status
• Medicare entitlement, and
• Reason for termination

COBRA Notice Requirements

The law requires that you send several Consolidated Omnibus Budget Reconciliation Act (COBRA)-related notices to employees and qualified beneficiaries, particularly when their health plan coverage begins and ends, as well as when they are not eligible for continuation of coverage. You must also notify the COBRA health insurance plan administrator of the details regarding individual employees' qualifying events. Employees are required to notify you when a qualifying event occurs, and you can establish reasonable procedures for employees to provide notice.

Electing COBRA Coverage

Qualified beneficiaries have 60 days in which to elect or waive Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage, and it is essential that you make a good faith effort to ensure that beneficiaries receive election notices in a timely fashion. Also, there are some employees who can take advantage of a second chance to elect coverage if their jobs are affected by increased imports of competing products, as defined by the Trade Act of 2002.

Paying for COBRA Insurance Coverage

Consolidated Omnibus Budget Reconciliation Act (COBRA) regulations provide clear guidance on allowable premium amounts and premium due dates. They also provide guidance on how to handle insufficient premium payments.

Terminating Coverage

Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage terminates either at the end of the coverage period required by law, or when one of four specific events occur. California law also requires the extension of COBRA coverage under certain conditions. Other issues to consider in relation to termination of coverage include Health Insurance Portability and Accountability Act (HIPAA) requirements, Employee Retirement Income Security Act (ERISA) provisions, and beneficiary options for converting COBRA coverage to an individual health care policy.

Prohibitions

Final Consolidated Omnibus Budget Reconciliation Act (COBRA) regulations explicitly prohibit certain acts on the part of an employer, such as reducing or eliminating health coverage in anticipation of a qualifying event.

Penalties for COBRA Infractions

You risk serious financial penalties if you do not comply with Consolidated Omnibus Budget Reconciliation Act (COBRA) regulations, even if your error was unintentional.

California Continuation Benefits Replacement Act (Cal-Cobra)

The California Continuation Benefits Replacement Act of 1997 (Cal-COBRA) is an expansion of federal Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage. It requires insurance carriers and Health Maintenance Organizations (HMOs) to provide COBRA-like coverage to employees of smaller companies (2 to 19 employees) in California, who are not subject to federal COBRA provisions.

When Not Applicable

Certain individuals are not eligible for California Continuation Benefits Replacement Act of 1997 (Cal-COBRA) coverage, such as those who become entitled to Medicare benefits or fail to give timely notice of qualifying events.

California Extension of COBRA Coverage

If an enrollee is entitled to less than 36 months of continuation coverage under COBRA health insurance and has exhausted continuation coverage under COBRA, California health plans must offer the enrollee the opportunity to continue coverage for up to 36 months from the date the enrollee's continuation coverage began.

Cal-COBRA Required Notices

The California Continuation Benefits Replacement Act of 1997 (Cal-COBRA) requires that certain notices about coverage be provided to insurance carriers and employees at certain times.

Cost and Length of Coverage

The California Continuation Benefits Replacement Act (Cal-COBRA) specifies the amount a qualified beneficiary can be charged for continuation coverage, how long the continuation coverage can last, and when coverage can be terminated.

Related Resources

HRCalifornia subscribers have access to several tools and services that help those who manage human resources to work through COBRA and Cal-COBRA issues, including:

COBRA Rights - Acknowledgment of Receipt of Notification »
Provide this form to an employee if the employee has coverage for himself/herself plus any other family members and coverage is being ended due to termination of employment or reduction in hours. You need to send out additional COBRA notices to those individuals indicated on the form who do not reside with the employee.

COBRA Administration Guide »
Begin using this COBRA administration guide when an employee is hired and refer back to it when a qualifying event occurs.

Cal-COBRA - Notice to Carrier »
Send this Cal-COBRA notice to the health/disability insurance carrier when any qualified beneficiary becomes subject to Cal-COBRA because of a qualifying event.

Cal-COBRA - Notice to Employee »
Send this notice to an employee at least 30 days before a current group benefit plan terminates because of a change in group plans. You must send information about the new group benefit plan, benefits information, premium information, enrollment forms, instructions, etc., necessary to allow the qualified beneficiary (employee) to continue coverage.