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COBRA Health Insurance Continuation

 

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Authoritative COBRA Resources

Our intent is to provide a concise and useful overview of COBRA, which is subject to volumes of rules.  For more complete information, refer to the Department of Labor (DOL).  The following DOL website links are useful:

Businesses that must Comply

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) is a federal law that requires group health plans to provide continuation of health care coverage.

COBRA applies to group health plans for employers with 20 or more employees on more than 50 percent of typical business days in the previous calendar year.  Both full and part-time employees are counted to determine whether a plan is subject to COBRA.  Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full time.

Plans Subject to COBRA

Plans subject to COBRA include:
  • Insured and self-funded group health plans, including HMOs
  • Dental plans
  • Vision plans
  • Section 125, flexible spending accounts
  • Employee assistance plans, if they provide benefits beyond referral services
COBRA does not apply to:
  • Some church plans
  • Federal government plans
  • Disability income plans
  • Life insurance and accidental death and dismemberment plans
  • Long term care insurance

Qualifying for COBRA Continuation

A qualifying event is one that results in a loss of coverage and includes:
  • Termination of employment, other than for gross misconduct
  • A reduction in work hours
  • Death of the covered employee
  • Divorce or legal separation from the covered employee
  • Loss of dependent child status
  • Employee enrollment in Medicare

Length of COBRA Continuation

The following chart shows the maximum period of COBRA continuation that must be offered:



Qualifying
Event
Qualified
Beneficiary
Maximum
Continuation
Termination (for other than gross misconduct) or reduction in hours Employee
Spouse
Dependent Child
18 months*
Employee enrollment in Medicare Spouse
Dependent Child
36 months
Divorce or legal separation Spouse
Dependent Child
36 months
Death of employee Spouse
Dependent Child
36 months
Loss of dependent child status under the plan Dependent Child 36 months

* In certain circumstances, qualified beneficiaries entitled to 18 months of continuation may become entitled to a disability extension of an additional 11 months (for a total maximum of 29 months) or an extension of an additional 18 months due to the occurrence of a second qualifying event (for a total maximum of 36 months).

Paying for COBRA Continuation

The cost of COBRA is the full premium, including any portion that had been paid by the employer.  A 2% administrative fee may be added to the premium.

If coverage is extended due to disability. the premium charges for months 19 through 29 may be increased to 150% of the full premium.

COBRA Administrative Services

COBRA legislation is extensive and subject to change.  It's almost impossible for a small company to achieve, on its own, full COBRA compliance.  We advocate using professional COBRA administrators to ensure consistency and minimize financial risk.

If you're responsible for COBRA administration at your company, consider attending a seminar provided by one of the more well-known COBRA administrators.  If you are not particularly familiar with COBRA, you will, through one of these seminars, come to appreciate COBRA's scope and the potential downside of COBRA noncompliance.  We recommend Infinisource of Coldwater MI.


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