While it’s not the most exciting topic, many new hires and current employees look forward to learning about their health insurance benefits in their onboarding package. Knowing the status of their health coverage and what they can do in the face of a possible medical emergency brings peace of mind to employees and their dependents. COBRA continuation coverage is a viable option for qualified employers. Here is the information you need to know when offering COBRA to your employees.
[Read: Small Business Guide to Offering Health Insurance]
What is COBRA?
COBRA, also known as the Consolidated Omnibus Budget Reconciliation Act of 1986, requires group health plans to provide continuation of coverage to current and former employees, spouses or former spouses, and other dependents when something arises that would otherwise keep them from these benefits. Reasons could include a covered employee’s loss of job or reduction of hours, a separation or divorce, or a child’s loss of dependent status.
Who is entitled to COBRA?
Qualified beneficiaries: These individuals are employees – or spouses and dependents of employees – covered by a health plan on the day before a qualifying event occurs. Beneficiaries can be highly dependent on personal cases. For example, certain cases of employer bankruptcy may qualify employees and their dependents. Additionally, a child adopted to a qualified employee during their continuation coverage is a qualified beneficiary.
Qualified events: These events cause the employee and/or their dependents to lose group health coverage. COBRA only applies the minimum number of requirements for continuation coverage whereas other health plans may extend the time period they can utilize the coverage as well as lower the cost. Qualified events include:
- Termination either willingly or unwillingly of the covered employee.
- Reduction of employment hours.
- Covered employee becomes entitled to Medicare.
- Divorce or legal separation from the covered employee.
- The death of a covered employee.
To offer COBRA, you have to notify employees, provide coverage on all plans and determine the length of the coverage.
Who is required to offer COBRA?
COBRA is generally subject to private-sector employers with at least 20 or more employees. These employees typically work at least 50% of business days from the prior calendar year. This means even part time employees may qualify for COBRA coverage.
Those who don’t qualify for COBRA coverage include employees who qualify for Medicare, those not yet eligible for a health plan based on employer requirements and those who decline participation in a group health plan. However, these requirements could be multifaceted and should be discussed with HR before making decisions on qualifications under your company’s COBRA coverage.
[Read: Employee Health Insurance: How Much Should the Employer Pay?]
How to offer COBRA?
Notify employees of their COBRA rights
Employees should be notified of their rights to COBRA no longer than 90 days from when an employee first joins your company’s group health insurance plan. They will have their rights to COBRA explained and general guidelines for their obligations under COBRA.
Employees should also be notified when a qualifying event occurs. This must be done within 14 days of the event and the employee or dependents have 60 days to decide if they want to continue with coverage.
Provide COBRA coverage under all health care plans offered
When a qualifying event happens, COBRA is in effect and an employer must offer the employee or dependent all options to coverage within the health care plans the employee is enrolled in. This includes medical coverage as well as medical flexible spending accounts and standalone hearing, dental and vision plans.
Determine how long to provide COBRA coverage
COBRA coverage typically lasts for 18 months from the date the coverage was elected after the qualifying event. Coverage can last for up to 36 months for dependents or if the employee experiences a second qualifying event in the timeframe of their first COBRA continuation. Additionally, a disabled employee’s coverage can extend to 29 months.
COBRA compliance and administration can be confusing and time consuming to maintain. If you have any questions or concerns about your company’s requirements, be sure to contact an HR professional and attorney before making any decisions or creating any company policies involving COBRA.
[Read: A Complete Guide to COBRA Health Insurance]
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