The 1985 Consolidated Omnibus Budget Reconciliation Act (COBRA) applies to employers with group health insurance and 20 or more employees in the preceding calendar year. The law also covers cafeteria plans, as well as drug and alcohol treatment plans. Not included are medical savings accounts and group health insurance with only long-term care.
COBRA enables workers to continue health insurance coverage for up to 18 months when one of five qualifying events occurs. The first qualifying event is a divorce or legal separation. The second is a military leave of absence. The third is a loss of eligibility under the health plan due to a decrease in work hours. The fourth is termination of employment for any reason, including layoff or cessation of disability benefits.
An exception is termination for gross misconduct, the definition of which has not been defined or agreed upon by the courts. The fifth is if the employer becomes bankrupt or discontinues the plan.
Dependents covered under the plan are eligible for COBRA coverage if the team member dies, enrolls in Medicare, is terminated for any reason or loses eligibility due to a decrease in work hours. Also included is a loss of dependency status due to age. Dependents have the right to extend COBRA coverage for an additional 18 months if the laborer dies, qualifies for Medicare or is divorced/legally separated. A child ceasing dependency within the first 18 months of COBRA coverage is also included.
The employer must give staff members notice of their right to choose COBRA. The associate must choose COBRA and pay for it. Before November 2004, the law did not specifically state how to provide notification of qualifying events. This changed with the new COBRA notice rules that began in November 2004 and are effective for each company plan starting on or after Nov. 26, 2004. For many businesses, that will be this calendar year.
Five types of notices are now required. First, furnish a general notice outlining qualifying events upon enrollment. Include plan-specific information at the commencement of coverage. State the name of the plan and specific party to contact for further information.
Second, provide notice to qualifying beneficiaries upon qualifying events. The beneficiary or associate must give notice of a qualifying event to the party who customarily handles employee benefit matters. The notice must be provided within 60 days from the latter of the date of the qualifying event, coverage is lost, or the beneficiary notified. If the qualifying event is due to disability, the company must notify the plan within 60 days after the latter of the date that coverage is lost, the qualifying event occurs, a determination on Social Security disability is made, or the beneficiary is informed about obligations to provide a disability notice.
Third, an election notice must be provided by the plan to persons eligible to elect COBRA coverage. Identify the beneficiary by reference to status or name. It is recommended information be included regarding Trade Act assistance.
Fourth, notice must be given on unavailability of COBRA by the plan, if there is a major change. This notice is utilized when the plan determines there is no qualifying event or because the beneficiary notice to the plan was untimely or incomplete. The plan has a 14-day window after receipt of the election form from the beneficiary.
Fifth, prior to the end of the maximum COBRA period, provide an early termination notice concerning coverage. The plan is required to notify the beneficiaries as soon as reasonably practical. Termination of coverage might occur due to loss of disability status, termination of the plan for all staff, failure of the beneficiary to pay premiums, enrollment of the beneficiary in another plan, or the beneficiary beginning coverage under Medicare.
Since the changes in the law are now in effect, it is imperative to begin compliance. Contact your insurance plan administrator for further assistance.
Lynne Haggerman is president/owner of Haggerman & Associates, a firm specializing in management training, retained search, outplacement and human resource consulting.
