The right to continuation coverage was created by a federal law, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). COBRA allows employees and their covered dependents to stay on the employer-sponsored group health plan for a limited period of time, at their cost, when they lose coverage due to certain qualifying events.
Group Health Plan Coverage Subject to COBRA
The following employer health plans are subject to COBRA, if in the preceding calendar year, the employer had at least 20 employees (including part-time) for the majority of the year:
- Medical, prescription drug, dental, and vision
- Employee Assistance Plan (EAP) if medical coverage provided, such as visits to a physician
- Health flexible spending account (health FSA), usually only if participant has a positive balance at termination
Group Coverage NOT Subject to COBRA
The following employer-sponsored plans are not subject to COBRA:
- Short-term and long-term disability
- Long-term care
- Dependent care flexible spending account (dependent care FSA)
- Health plans with less than 20 employees (including part-time) in the preceding calendar year
Qualified beneficiaries are the employee and his/her dependent(s) who are covered by the health plan at the time of a qualifying event. Once a qualified beneficiary is on COBRA continuation, newly acquired dependents (spouse or child) may be added; however, newly acquired spouses are not considered qualified beneficiaries with their own COBRA rights. You may be able to offer COBRA-equivalent coverage to covered domestic partners, but they also typically will not be considered qualified beneficiaries with their own COBRA rights. You should check with your insurance carrier before offering COBRA-equivalent coverage to domestic partners.
Qualifying Events and Duration of Coverage
The following are qualifying events when they cause a loss of health plan coverage to the employee and his/her dependent(s):
- Termination of employment – 18 months maximum for employees/dependent(s)
- Reduction in hours – 18 months maximum for employees/dependent(s)
The following are qualifying events when they cause a loss of health plan coverage to an employee’s dependents:
- Employee’s death – 36 months maximum for dependent(s)
- Employee’s divorce or legal separation – 36 months maximum for dependent(s)
- Employee’s entitlement to Medicare – 36 months maximum for dependent(s)
- Dependent loses dependent child status under the plan – 36 months maximum for dependent(s)
The above events can also be second qualifying events, which allow a dependent on COBRA during an 18 month period of coverage to extend COBRA to a 36 month period of coverage from the date of the initial qualifying event. A second qualifying event can extend COBRA coverage only if the event would have caused a loss of coverage if the initial event had not occurred. For example, if an employee’s Medicare entitlement would not cause the employee/dependent(s) to lose coverage, it cannot be considered a second qualifying event for the purposes of extending COBRA coverage.
An 18 month period of coverage may also be extended to a 29 month period of coverage from the date of the initial qualifying event if an employee/dependent is determined to be disabled by the Social Security Administration (SSA) at some time before the 60th day of COBRA continuation coverage.