COBRA health insurance gives your qualified beneficiaries the opportunity to continue to be enrolled in the same health coverage they were enrolled in when the qualifying event interrupted their coverage. But not every employer is required to offer temporary health insurance. And, since COBRA is federally regulated, it’s important to know when it needs to be offered and for how long. Learn the answers to the following common COBRA regulation questions to determine how you’re impacted by the long-standing federal law.
Who has to offer COBRA?
If you employ at least 20 people, then you’re likely required to provide COBRA to your qualified beneficiaries. A few factors to consider include:
- Your employee count of 20 must be reached on more than 50% of business days in the previous calendar year.
- Full-time and part-time employees are counted, although part-time employees count as a fraction of full-time employees, and that fraction is based on the number of hours the part-time employee works.
- State and local governments are among those that must offer COBRA if the above requirements are met. The law doesn’t apply to plans sponsored by the federal government or by churches.
What events require offering COBRA?
If your business/organization is required to offer COBRA coverage, then you must offer it to an individual who lost coverage in your group health plan after they experienced a qualifying event. Qualifying events include:
- An employee’s employment is terminated for any reason other than gross misconduct.
- An employee experiences a reduction in hours.
Additionally, spouses or dependent children need to be offered COBRA if one of the above or following events impacts their coverage:
- The covered employee becomes entitled to Medicare.
- Divorce or legal separation from the covered employee.
- Death of the covered employee.
- Loss of dependent child status (under the plan rules).
- Your business or organization declaring bankruptcy.
When does COBRA need to be offered?
You have 30 days to notify your plan administrator that a qualifying event has occurred. Within 14 days of notification, your plan administrator must mail a Specific Rights Notice (SRN) to the individual who is now eligible for COBRA. From there, it’s in the hands of the qualified beneficiary to decide whether or not to elect COBRA.
What does COBRA cost, and who pays for it?
COBRA health insurance premiums can’t cost more than the cost of coverage through the group health plan, plus a 2% administration charge. Employees typically pay the entire cost of COBRA coverage, but an employer can opt to pay for a portion of coverage under certain circumstances. You can also save you and your employees money by offering coverage through a COBRA alternative marketplace.
How long can a qualified beneficiary be covered by COBRA?
You’re required to provide COBRA coverage for 18 or 36 months, with the length of time determined by the type of qualifying event that occurred. For example, when the qualifying event is an employee’s termination or reduction in hours, you’re only required to offer continuation coverage for 18 months. Most other qualifying events require 36 months of coverage to be offered, but there are variables.
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The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers.
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