Understanding COBRA: Key Information and Guidelines
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows employees and their dependents to continue group health benefits after losing coverage due to qualifying events like job loss or divorce. This act applies to group health plans with 20 or more employees. Qualifying events include death of a covered employee, termination, divorce, and more. Employers must adhere to notice requirements and provide continuation coverage with specific rules. Understanding COBRA is essential for both employees and employers.
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COBRA: What is it and what do we need to know
Consolidated Omnibus Budget Reconciliation Act of 1985 Gives employees and their dependents 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 Applies to all group health plans with 20 or more employees in the prior year Count employees of all trades or businesses under common control State mini-COBRA laws
Qualifying Events Death of a covered employee Termination (other than by reason of the employee s gross misconduct) Including voluntary/involuntary Reduction in hours Divorce or legal separation Entitlement to Medicare benefits Ceasing to be a dependent Substantial elimination of coverage
Gross Misconduct Not defined in COBRA, judicially developed construction Employer must have proof of actual misconduct, not just a good faith belief General principles: The action of the employee must be affirmative and willful ordinary negligence is not enough to support a gross misconduct determination. A substantial deviation from the standards and obligations set forth in employer policies can be enough to support a gross misconduct determination. The presence of criminal conduct is not necessary to support a gross misconduct determination.
Notice Requirements 30 Employer must provide plan administrator of notice of qualifying event (QEN) within 30 days 14 Plan administrator must notify participant of COBRA election rights within 14 days Employer that is also a plan administrator has 44 days to notify qualified beneficiary 60 Qualified beneficiary must elect within 60 days from date notice is received
Continuation Coverage Identical coverage must be offered Premium may not exceed 102% of the plan s cost QB pays 100% of premium Initial premium payment due within 45 days of QB s election Required 30 day grace period for subsequent payments Employer can pay some/all for as little/long as they want Coverage lasts 18, 29 or 36 months depending on QE Coverage begins on date of QE Even if employer provided coverage extends beyond date of QE
Most Common Issues Gross Misconduct Termination New v. Family Health Care nurse leaving a patient unattended and leaving work, where nurse had not been similarly derelict in the past, is not gross misconduct Nakisa v. Cont l. Airlines employee using racial slur and throwing apple at coworker is gross misconduct
Most Common Issues Deficient/Untimely Notice Hagar v. DBG Partners, Inc. statutory penalty of $100/day awarded to former employee enrolled in COBRA coverage where plan was terminating
Most Common Issues Severance / ACA Marketplace Leaving terminated employees enrolled as active employees may run afoul of terms of eligibility requirements of insurance contract, if fully- insured, or terms of stop-loss contract, if self-insured Paying COBRA premium to plan directly avoids being treated as taxable wages Special enrollment period for Marketplace coverage upon termination of employment Cash payments can offset subsidized COBRA
