COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It is a federal law that provides employees with the option to continue their employer-sponsored health insurance coverage for a limited time after they leave their job or experience certain life events that would otherwise cause them to lose their coverage.
COBRA applies to employers with 20 or more employees and allows eligible employees and their dependents to continue their health insurance coverage for up to 18 months (or longer under certain circumstances) by paying the full premium, including the portion previously paid by the employer.
COBRA coverage can be a useful option for those who are in between jobs, going through a life transition such as divorce, or waiting for new insurance coverage to begin. It is important to note that not all employers offer COBRA coverage, and the cost can be significantly higher than what the employee paid while employed.
COBRA coverage can be offered for up to 18 months for qualifying events such as voluntary or involuntary job loss, reduction in work hours, or certain life events like divorce or death of the employee. In some cases, coverage may be extended up to 36 months.
The employee or eligible dependent must elect to continue coverage within 60 days of the qualifying event, and coverage will be retroactive to the date of the event. If the employee or dependent fails to elect COBRA coverage during the 60-day window, they may lose their right to continue coverage.
The cost of COBRA coverage is usually higher than what the employee paid while employed because the employer is no longer contributing to the cost. The employee will be responsible for paying the full premium, including the portion previously paid by the employer, plus a 2% administrative fee.
COBRA coverage is generally the same coverage offered to active employees, including medical, dental, and vision insurance. However, some employers may offer different coverage options for COBRA participants.
If the employee or dependent becomes eligible for other health insurance coverage, they may lose their right to continue COBRA coverage.
COBRA coverage can be extended beyond 18 months in certain circumstances. For example, if the employee or dependent is disabled, they may be eligible for an extension of up to 29 months. If the employee dies, the surviving spouse and dependent children may be eligible for up to 36 months of coverage.
COBRA coverage is not available for all types of health insurance plans. It applies to group health plans sponsored by employers with 20 or more employees, as well as state and local government employee plans. It does not apply to individual health insurance plans or to small group plans with fewer than 20 employees.
Employers are required to provide written notice to employees and their dependents about their rights under COBRA, including the right to continue coverage and the cost of coverage. The notice must be provided within 14 days of a qualifying event.
COBRA coverage is temporary and should not be relied on as a long-term solution for health insurance. Those who need ongoing coverage may want to consider other options, such as purchasing individual health insurance or enrolling in a spouse’s employer-sponsored plan if available.
COBRA coverage is a federal law and is therefore consistent across all states. However, some states may have additional laws or regulations that provide additional protections or requirements for COBRA participants.