Kara Sears
Employees in the U.S. are protected by the Consolidated Omnibus Budget Reconciliation Act (COBRA), a federal law that allows them to maintain their employer-provided health insurance in the event of job loss, reduction in hours, or other qualifying events. While COBRA provides temporary coverage, typically lasting 18 to 36 months, employees may be required to pay the full premium for this coverage. Additionally, state laws may offer continued group health insurance coverage or the option to convert to individual coverage after employment ends. However, if an employer makes sudden changes to health coverage without notice, employees may have legal recourse, such as filing a lawsuit for breach of contract. Understanding these laws is crucial for employees to make informed decisions about their health plans and protect their healthcare rights.
| Characteristics | Values |
|---|---|
| Federal law | Consolidated Omnibus Budget Reconciliation Act (COBRA) |
| What it does | Gives eligible employees the right to continue their health insurance if they would otherwise lose that opportunity due to job loss or a cut in hours that brings them below the employer's coverage threshold. |
| Who is eligible | Employees who lose their health benefits due to voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. |
| How long does it last | 18-36 months |
| Cost | The employee may be required to pay the entire premium for coverage up to 102% of the cost to the plan. |
| State laws | State laws may also give employees the right to continue group health insurance coverage after leaving a job. |
| Alternatives | Employees can shop for insurance online through the Marketplace or qualify for a subsidy to help purchase insurance, depending on their income. |
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What You'll Learn
Consolidated Omnibus Budget Reconciliation Act (COBRA)
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law passed by the U.S. Congress in 1985 and signed by President Ronald Reagan. The law mandates an insurance program that gives eligible employees the right to continue their health insurance if they would otherwise lose it due to job loss or a cut in hours that brings them below the employer's coverage threshold. COBRA generally applies to employers with 20 or more employees and allows employees and their dependents to maintain coverage at their own expense, including the full cost of the premium plus up to a 2% administrative charge. This coverage is typically identical to the benefits received while actively employed.
COBRA is intended to provide temporary coverage, generally lasting 18 to 36 months, to bridge the gap between job-based coverage and the start of new health insurance. It is important to note that COBRA cannot be enforced outside of a lawsuit, and state laws often provide more accessible avenues for former employees to maintain group health insurance coverage. These state laws may require employees to have been covered for a certain period before termination, typically three months. Additionally, some states may offer the option to convert group coverage to individual coverage, although this tends to be more expensive and have lower coverage limits.
While some employers may voluntarily subsidize COBRA insurance costs as part of a termination package, it is more common for the former employee to bear the entire cost. However, the American Recovery and Reinvestment Act of 2009, signed by President Barack Obama, includes a 65% subsidy for employees for up to 15 months after involuntary termination, with certain income-based conditions. Employers subject to Federal COBRA are required to notify terminated employees of their potential rights under this Act.
COBRA is just one aspect of a comprehensive law that covers various subjects, including tobacco price supports, railroads, private pension plans, emergency department treatment, disability insurance, and the postal service. It is most well-known for its impact on health insurance, providing employees with continued access to critical healthcare services during transitional periods.
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Continuation of coverage for dependents
Continuation of health coverage for dependents is provided for under the Consolidated Omnibus Budget Reconciliation Act (COBRA), a federal law. COBRA gives workers and their families who lose their health benefits the right to continue group health benefits for limited periods under certain circumstances, such as job loss or a reduction in hours worked. This includes the employee's dependents, such as a spouse, former spouse, or children, who are eligible for COBRA coverage even if the employee does not sign up.
COBRA generally applies to employers with 20 or more employees in the prior year, and the coverage period can range from 18 to 36 months, providing time to find other insurance options. However, the cost is a significant factor, as individuals may be required to pay up to 102% of the premium for coverage.
In addition to COBRA, state laws may also provide rights to continue health insurance after job loss. Some states have mini-COBRA laws, while others may require health insurance companies to offer the option of converting group coverage to individual coverage. State laws can provide additional protections, such as Arizona's law requiring insurers to continue coverage for dependents upon the death of a covered employee or divorce.
Individuals who continue coverage under COBRA or similar laws may be eligible for subsidies to help with the cost of premiums. For example, Section 3001 of the American Recovery and Reinvestment Act of 2009 (ARRA) provides a subsidy covering 65% of COBRA premiums for involuntarily terminated workers and their dependents.
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State laws on insurance continuation
State Continuation generally applies to companies with fewer than 20 full-time employees, with Federal COBRA applying to companies with 20 or more full-time employees. State Continuation coverage length is based on the state in which the group plans are written, and it is important to note that dental and vision coverage may not be available in every state. For example, in Massachusetts, eligible employees of companies with fewer than 20 employees can receive health coverage for 18 months after termination, or 29 months if disabled.
State Continuation coverage is a continuation of the coverage employees had while actively employed, with the only difference being that the employee is responsible for paying the premium in full. This coverage is helpful for those who need health coverage during the time between losing job-based coverage and beginning other health coverage. Employees have 60 days to enroll in State Continuation once their employer-sponsored benefits end, and coverage is typically retroactive to the day after the original loss of coverage.
In addition to State Continuation, federal and state COBRA laws also give employees the right to continue their health insurance after a job ends. COBRA coverage can be more costly than what an employee paid under their employer's plan as they are now responsible for 100% of the costs.
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Qualifying life events
A qualifying life event is a significant, life-changing situation that may be planned or unexpected and can impact your health insurance coverage. These events allow you to change your health plan outside of the annual enrollment period.
Some common examples of qualifying life events include:
- Loss of health coverage: Losing your health insurance or expecting to lose coverage within the next 60 days is considered a qualifying life event. This may be due to job loss, a reduction in work hours, or your employer discontinuing their contribution to your health plan.
- Change in residence: Relocating to a different zip code, county, or state that offers different insurance options can be a qualifying life event. This may include moving to an area where your current coverage is unavailable or where new plans are available.
- Changes in your household: Gaining or losing dependents through birth, adoption, marriage, divorce, or death can impact your health insurance coverage and qualify you for a Special Enrollment Period (SEP).
- Turning 26 years old: At this age, individuals typically need to transition from their parents' health insurance plan to finding their own coverage.
- Special circumstances: Certain events, such as earning U.S. citizenship, natural disasters, or public health emergencies, may also qualify you for a Special Enrollment Period.
It is important to note that you may be required to provide documentation to confirm the qualifying life event. Contact your health insurance provider to understand the specific requirements and options available to you.
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Employee lawsuit
Employees depend on a certain number of work hours. When those hours are cut, it can be very problematic. While there is no universal answer to whether an employee can sue their employer for cutting their hours, there are certain situations where an employee may be able to sue their employer for compensation for their losses.
Firstly, it is important to consult with an employment attorney who can assess the specific circumstances and advise on potential damages that may be recoverable based on applicable laws and regulations. Employment laws vary by jurisdiction, so it is important to consult with an attorney familiar with local labor laws to determine the specific legal grounds for suing an employer over reduced work hours. They can assess the situation and advise on whether there are valid legal claims based on the circumstances.
There are various situations where an employer may be sued for reducing an employee’s working hours. Some examples include:
- An employer disproportionately reduces the hours of employees who belong to a protected class under anti-discrimination laws.
- An employer cuts an employee’s hours in retaliation for engaging in legally protected activities such as whistleblowing or filing a complaint against the company.
- An employer reduces employees' hours to avoid providing them with health insurance as per the ACA.
To build a strong case, it is critical to keep detailed records when dealing with hour cuts. Maintain copies of your schedules, performance reviews, pay stubs, position changes, or other HR documentation, including company policies and handbooks. If any incidents occur, such as harassment, document the details of what happened, including the time and location, and any witnesses. Any factual documentation relevant to a lawsuit regarding cutting hours is important and can increase your chances of a successful outcome.
In addition to federal laws, state laws also give employees the right to continue their health insurance after a job ends or allow them to convert their group policy to individual coverage.
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Frequently asked questions
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal law that gives eligible employees the right to continue their health insurance if they lose their job or experience a cut in hours that brings them below the employer's coverage threshold.
Yes, your employer can cut your health coverage. If your employer cuts your health coverage or you lose your job, you have options for finding new insurance. You can shop for insurance online through the Marketplace and may qualify for a subsidy depending on your income.
If your employer cancels your group health care coverage but continues to employ you, some states have laws that require health insurance companies to offer you the option of converting your group policy to individual coverage. Individual coverage is typically much more expensive than group coverage, and the coverage limits are usually much lower.
No, unless it was during a time of open enrollment. If your employer makes a significant change to your health coverage without notice, you may be able to sue for a temporary injunction to keep the plan from changing.
