The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly know as COBRA became effective in July of 1986. It was a mixture of legislation but is mostly known as a law mandating (most) employers to offer employees and/or their covered dependents the right to continue their group coverage should they experience a “qualifying event.”
All companies offering a group health plan are required to offer COBRA continuation coverage with the exception of 1) Employers with less than twenty employees; 2) Church Groups; and the Federal Government. The “Small Employer Exception” states employer groups with less than twenty employees on half the days in the previous calendar year (with part-time employees equaling a percentage of a full-time employee) are not required to offer continuation coverage during the current year. (Some states have lowered the minimum for the Small Employer Exception by mandating state continuation coverage similar to COBRA.)
The six qualifying events are – termination of employment, reduction in work hours, employee’s death, divorce or legal separation, Medicare entitlement and loss of “dependent status.” Individuals experiencing a qualifying event are called “qualified beneficiaries” or “QBs.”
The length of time for COBRA continuation coverage is based upon the qualifying event experienced. Employees experiencing a termination of employment and a reduction in work hours shall be eligible for up to eighteen months of continuation coverage. Dependents experiencing an employee’s death, divorce, Medicare entitlement or a dependent (usually a child) who no longer qualifies as a “dependent” under the insurance company’s group contract are eligible for thirty-six months of coverage.
Employers are responsible for providing a COBRA Qualifying Event Letter explaining the employee’s (and covered dependents) continuation rights under COBRA. The employer has fourteen days from the later of the date of the qualifying event or the date coverage is lost to send this notification. Legislation states employers shall send the notification via first class mail to the last known address of the employee. The qualified beneficiaries then have up to sixty days to notify the employer of their decision to accept COBRA. Once accepted, they have up to forty-five days to make their first premium payment.
COBRA states you must provide an initial forty-five day grace period (from date of COBRA acceptance) to pay COBRA premiums. In most cases, premiums are retroactive back to the date coverage was lost, henceforth “continuation coverage.” After the initial payment, COBRA participants have a thirty day grace period. In other words, if June’s premiums are not postmarked by June 30th, coverage may be terminated.
Employees who are disabled within the first sixty days of COBRA continuation may be offered an eleven month extension (or a total of twenty-nine months) provided they receive a determination from the Social Security Administration (SSA) during the first eighteen months. Both the employee and covered dependents are eligible for this extension. If the person is considered to no longer be disabled during the extension period, COBRA coverage may be terminated.
A multiple (or second) qualifying event is when a qualified beneficiary (with dependents) experiences a termination or employment or reduction in work hours and elects COBRA. During the eighteen months of continuation coverage, another qualifying event occurs (such as the employee’s death, divorce/legal separation, Medicare entitlement or loss of “dependent” status). At this point the dependents should be offered the right to extend their coverage for a total of thirty-six months from the employee’s original COBRA start date.