COBRA

What is COBRA? 

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees to continue health care coverage under the employer’s group plan after they have been laid off or terminated.  The continued coverage lasts for 18 to 36 months depending on qualifying event that entitled the employee to coverage.  COBRA requires employers to take on notice requirements.  Often, employers outsource these responsibilities. 

Who is not eligible for coverage under COBRA?

Employee misconduct that is intentional, reckless, willful or deliberate will disqualify the employee from coverage pursuant to COBRA.  Some examples include:

  • Theft
  • Embezzlement
  • Violation of company policy
  • Lies
  • Driving a Vehicle Under the Influence of Alcohol
  • Offsite Assault on a Coworker 

What employers are subject to COBRA?

n  Covers private employers with 20 or more employees.   In order to determine if an employer has 20 employees, both full and part-time employees must be considered.  A part-time employee, however, will only count as a fraction of an employee equal to the fraction of a full-day that they work.  For example, if a part-time employee works four hours of an eight hour work day, he or she will count as ½ an employee.

What is required of an administrator?

There several notice requirements, including:

  • Initial or General Notice:  For example, when they are hired plan administrators must provide notice in writing to a covered employee that he or she is covered within 90 days.  Usually this is included with notice of the summary plan of benefits.
  • Qualifying Event Notice:  Either the employer or employee needs to notify the health plan provider that a qualifying event has occurred.  This notice must be sent within 30 days after a qualifying event.  The burden is on the employer in the following circumstances: 
    • Voluntary or involuntary termination of employment
    • Reduction of hours
    • Death of the covered employee
    • Employee becomes eligible for Medicare
  • Election Notice:  Plan administrator must inform a beneficiary that they have a right to choose COBRA coverage. 

How is COBRA enforced?

Individuals can bring civil actions to enforce COBRA.  An employer who fails to properly comply with COBRA can be subject to the following penalties:

  • Excise taxes ($100 for every day that it does not comply)
  • Fines for failing to satisfy COBRA’s reporting and disclosure rules
  • Civil penalties for damages resulting from a plaintiff’s lack of health coverage
  • Attorney’s fees

Additional Resources:

An Employer’s Guide to Group Health Insurance Coverage Under Cobra

www.dol.gov/ebsa/pdf/cobraemployer.pdf