COBRA Health Insurance Continuation
Authoritative COBRA Resources
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
- 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
- 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
- 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.
