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Throughout a career, workers face multiple life events, job changes, or even job losses. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 helps workers and their families maintain group health coverage during these transitions.

Overview of the Law

COBRA gives workers who lose their health benefits the right to choose to continue group health benefits provided by their plan under certain circumstances. This generally applies to group health plans maintained by employers with 20 or more employees in the prior year.

The law applies to private-sector plans and those sponsored by state and local governments (administered by the Department of Health and Human Services).

Qualifying Events

Several events can trigger the right to COBRA coverage by causing a loss of group health benefits:

  • Voluntary or involuntary termination of employment (for reasons other than gross misconduct).
  • Reduction in hours worked by the covered employee.
  • Covered employee becomes entitled to Medicare.
  • Divorce or legal separation from the covered employee.
  • Death of the covered employee.
  • Loss of "dependent child" status under the plan rules.

Periods of Continuation Coverage

Qualified Beneficiary Qualifying Event Period of Coverage
Employee, Spouse, or Dependent child Termination or Reduced hours 18 months*
Spouse or Dependent child Entitled to Medicare, Divorce, Legal separation, or Death of employee 36 months
Dependent child Loss of dependent child status 36 months

*This 18-month period may be extended for all qualified beneficiaries if certain conditions are met, such as a determination of disability. Conversely, coverage may be cut short in specific cases.

Notification and Election

  • Initial Notice: Must be furnished to employees and spouses when coverage commences.
  • Plan Administrator Notification: Once notified of a qualifying event, the administrator must notify beneficiaries of their right to elect coverage.
  • Election Period: Beneficiaries have at least 60 days from the date the election notice is provided to elect coverage.
  • Individual Responsibility: Employees or family members must inform the administrator of divorce, legal separation, disability, or a child losing dependent status.
  • Employer Responsibility: Employers must notify the administrator of death, termination, reduced hours, or Medicare entitlement.

Premium Payments

Qualified individuals may be required to pay the entire premium for coverage, up to 102% of the cost to the plan. Failure to make timely payments typically results in a permanent loss of coverage.

  • Premiums are generally set in advance of each 12-month cycle.
  • Individuals are responsible for all costs related to deductibles, catastrophic limits, and other benefit limits.

Always notify the plan administrator if your marital status changes or if a spouse’s address changes to ensure proper delivery of COBRA notices.