Consolidated Omnibus Budget Reconciliation Act (COBRA)
In 1985, U.S. Congress passed COBRA, which was signed by President Ronald Reagan and became official on April 7, 1986. COBRA allows 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 of time under certain circumstances. Circumstances may include voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. COBRA coverage is available for 18 months for job termination either voluntary or in-voluntary, or the reduction of working hours. Disability can extend the 18 month period of continuation coverage, for a qualifying event that is a termination of employment or reduction of hours, for an additional 11 months if certain requirements are met. Coverage is available for 36 months for death, divorce, legal separation, loss of dependent child status, and the entitlement to Medicare.
COBRA requires that group health plans sponsored by employers with 20 or more employees offer employees and their families continuation coverage in certain instances where coverage under the plan would otherwise end. To be qualified for COBRA an individual should be covered by a group health plan on the day before a qualifying event. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Continuation coverage provided under COBRA should be identical to that available to participants who are not receiving COBRA coverage under the plan, and any change in benefits under the plan for active employees also applies to COBRA participants. Participants must also be allowed to make the same choices given to non-COBRA participants under the plan, such as during periods of open enrollment by the plan. Employers must notify plan administrators within 30 days of a qualifying event; plan participants and beneficiaries must then be sent an election notice within 14 days after notice of the qualifying event. The individual then has 60 days to decide whether to elect COBRA continuation coverage. Even if COBRA coverage is initially waived during the election period, the waiver of coverage may be revoked before the end of the election period. Group health coverage for COBRA participants is generally more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants pay the entire premium themselves plus a 2% administrative fee. COBRA premiums may be increased if the costs to the plan increase but are generally fixed in advance of each 12-month premium cycle. The initial premium payment must be made within 45 days; and if premiums are not paid by the first day of the period of coverage going forward, the plan has the option to cancel coverage until payment is received and then reinstate coverage retroactively to the beginning of the period of coverage. When a participant is no longer eligible for health coverage they must be provided with notice of such. COBRA may end earlier than the allotted time if premiums are not paid on a timely basis or the employer ceases to maintain any group health plan.
COBRA can be very involved and time consuming. There are many details in the qualifications and in the administration of COBRA. In addition to the terms and rights of COBRA as stated above and enforced by the federal government, Georgia has its own form of continuation coverage laws. Georgia continuation coverage is for employees of companies with 2-19 employees, who because of the limited number of staff would normally not be covered by COBRA. The Georgia continuation coverage is similar to COBRA with the main differences being that it is for 3 months only, and the employee had to be covered by the policy for the prior 6 months before the qualifying circumstance. HR Strategies is well versed in the qualifications and regulations of COBRA and Georgia Continuation Coverage, and can provide flawless administration of both to qualified participants. It is just one more way that we are able to free our clients from a burdensome but necessary HR task, and ensure that they are staying compliant with employment regulations.