The Cobra Law: When Did It Strike?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed by the U.S. Congress and signed into law by President Ronald Reagan in 1985, becoming effective on April 7, 1986. COBRA is a federal law that provides employees, retirees, and their families the right to continue group health benefits for limited periods under certain circumstances, such as job loss, reduction in hours, transition between jobs, death, divorce, and other life events. The law applies to employers with 20 or more employees and mandates that they offer temporary extensions of health coverage, known as continuation coverage, to those who experience a qualifying event. COBRA outlines the requirements for employees, employers, and plans to maintain health benefits during these transitions, with qualified individuals bearing the cost of coverage.

The Consolidated Omnibus Budget Reconciliation Act of 1985

COBRA was passed on a reconciliation basis and deals with a variety of subjects, including tobacco price supports, railroads, private pension plans, emergency department treatment, disability insurance, and the postal service. It is best known for Title X, which amends the Internal Revenue Code and the Public Health Service Act to deny income tax deductions to employers for contributions to a group health plan unless the plan meets certain continuing coverage requirements.

COBRA gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods under certain circumstances, such as voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage, up to 102% of the cost to the plan.

COBRA outlines how employees and family members may elect continuation coverage and requires employers and plans to provide notice. It does not require the employer to pay for the cost of providing continuation coverage but allows employees and dependents to maintain coverage at their own expense.

COBRA allows for coverage for up to 18 months in most cases, with longer coverage available in certain situations, such as disability or the death of the former employee. It does not apply if coverage is lost because the employer has terminated the plan or gone out of business.

Continuation coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed by the U.S. Congress and signed into law by President Ronald Reagan in 1985, with an official enactment date of April 7, 1986. COBRA is a federal law that provides employees, retirees, and their families with the right to continue their group health benefits for limited periods under specific circumstances, such as job loss, reduction in hours, transition between jobs, death, divorce, and other life events. This is known as "continuation coverage."

Under COBRA, employers with 20 or more employees in the prior year are generally required to offer continuation coverage. This coverage is typically available for up to 18 months, but there are certain exceptions that can extend the period. For example, if an individual is deemed disabled by the Social Security Administration, the coverage period may be extended to up to 29 months. In cases of divorce from the former employee, the coverage for the former spouse may continue for up to 36 months, and in the event of the employee's death, the widow's coverage may also continue for up to 36 months.

It is important to note that COBRA does not mandate the employer to pay for the cost of continuation coverage. Instead, employees and their dependents are responsible for maintaining coverage by paying the full premium, including an administrative charge of up to 2%. However, certain state laws and the American Recovery and Reinvestment Act of 2009 have provided subsidies to assist individuals in covering the cost of continuation coverage under specific circumstances.

Qualifying events

The Consolidated Omnibus Budget Reconciliation Act (COBRA) outlines a set of qualifying events that allow workers and their families to continue their group health benefits for limited periods. These qualifying events are circumstances that cause an individual to lose their health benefits, such as voluntary or involuntary job loss, reduction in working hours, transition between jobs, death, divorce, and other life events.

• Reduction in hours of employment
• Termination of employment for any reason other than gross misconduct
• Reduction in the hours of employment of the employee
• Termination of the employee's employment for any reason other than gross misconduct
• Divorce or legal separation from the employee
• Death of the parent-employee
• Reduction in the hours of employment of the parent-employee
• Termination of the parent-employee's employment for any reason other than gross misconduct
• The child stops being eligible for coverage under the plan as a dependent

Additionally, bankruptcy filings by the employer can also be a qualifying event. If an employer files for bankruptcy, resulting in the loss of coverage for retired employees, those retired employees and their spouses, surviving spouses, and dependent children become qualified beneficiaries.

Qualified beneficiaries

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed in 1985 and became law in 1986. It mandates an insurance program that allows employees and their families who lose their health benefits to continue group health benefits provided by their group health plan for limited periods under certain circumstances.

A qualified beneficiary is an individual who is entitled to COBRA continuation coverage because they were covered by a group health plan on the day before a "qualifying event". The following individuals may be qualified beneficiaries:

• A "covered employee" (a term that includes active employees, terminated employees, and retirees)
• A covered employee's spouse and dependent children
• Any child born to or placed for adoption with a covered employee during the period of COBRA coverage
• Agents
• Self-employed individuals
• Independent contractors and their employees
• Directors of the employer
• For public sector group health plans, political appointees and elected officials

Qualifying events are certain events that would cause an individual to lose health coverage under a group health plan. The type of qualifying event will determine who the qualified beneficiaries are and how long they will be entitled to COBRA coverage. Examples of qualifying events include:

• The death of the covered employee
• A covered employee's termination of employment or reduction of hours of employment
• The covered employee becoming entitled to Medicare
• Divorce or legal separation from the covered employee
• A dependent child ceasing to be a dependent under the generally applicable requirements of the plan

The length of the period of COBRA coverage will depend on the type of qualifying event that caused the qualified beneficiary to lose group health plan coverage. For "covered employees," COBRA coverage lasts for a maximum of 18 months. However, if the qualifying event is the death of the covered employee, divorce or legal separation of the covered employee from their spouse, or the covered employee becoming entitled to Medicare, COBRA for the spouse or dependent child can last for 36 months.

In certain circumstances, if a disabled individual and non-disabled family members are qualified beneficiaries, they may be eligible for an 11-month extension of COBRA continuation coverage, for a total of 29 months.

Cost of coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees to continue their health insurance coverage after leaving employment. However, this continuation comes at a cost, and it's important to understand the financial implications of COBRA coverage.

The cost of COBRA coverage can be significant. Individuals are typically required to pay the full amount of the insurance premium, including both the portion previously covered by the employer and their own prior contribution. This means that the cost of coverage has effectively doubled for the individual. On top of this, there is an additional administration fee of up to 2% that can be charged. As a result, the average monthly cost of COBRA insurance premiums can range from $400 to $700 per individual, and this can be out of reach for many.

It is worth noting that, in certain circumstances, the duration of COBRA coverage can be extended beyond the standard 18 months. For individuals deemed disabled by the Social Security Administration, coverage can be extended to up to 29 months. In the case of divorce from the former employee, the former spouse's coverage may continue for up to 36 months, and in the event of the death of the former employee, the widow's coverage may also continue for up to 36 months. These extended coverage periods naturally come at an additional cost.

While COBRA does not require employers to subsidise the cost of coverage, some employers may choose to do so as part of a termination or exit package. Additionally, there have been instances of federal stimulus packages providing subsidies for COBRA-enabled insurance, such as the American Recovery and Reinvestment Act of 2009, which included a 65% subsidy for up to 15 months after involuntary termination.

It is important to note that COBRA coverage is not the only option for individuals seeking to maintain their health insurance coverage. There are alternative plans available, such as short-term medical insurance and accident-only plans, which can be more affordable. These alternatives may provide a more cost-effective solution for individuals who are between jobs or unable to afford the full cost of COBRA coverage.

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