COBRA - Consolidated Omnibus Budget Reconciliation Act

COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.

The COBRA law is actually a very simple law. It identifies Qualified Beneficiaries - employees and dependents active on the coverage the day before the COBRA qualifying event. Should a Qualified Beneficiary lose insurance benefits because of certain specified reasons (qualifying events) they are allowed to continue the same Health Plan benefits as the non-COBRA participants. These benefits will be provided on a self-pay basis. This premium may also include a 2% administrative fee.

While the concept of the law is simple, the administration is much more difficult. Strict timelines for notices, elections, and payments are specified in the law.

Stepping outside, or not following the provisions of the law, could result in the employer totally self-insuring a claim situation or risking discrimination or litigation.

Again, this is an employer law. If the employer stays within the letter of the law, the carrier or third party administrator must abide by the law. But, if the employer steps outside the letter of the law (exceptions), they will likely be stepping outside by themselves - the carrier is not required to support the "outside of the law" activity.

Who Must Comply - COBRA is an IRS and DOL law. This explains why the employee count "test" is determined on a Jan. 1 to Dec. 31 time frame. All health plan sponsoring employers having 20 or more employees over half the typical business days in the preceding calendar year, must comply with COBRA continuation provisions for participants losing insurance during the next calendar year. The employer exceptions are: 1) The Federal Government, 2)Church Plans (as defined in section 414(e) of the IRS Code)

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