Understanding COBRA Continuation Options

HR Resource
December 14, 2012 — 1,993 views  
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COBRA was enacted by Congress in 1986 and allows qualified individuals the opportunity to continue their elected medical coverage such as health, dental, vision or a Flexible Spending Account (FSA) through their employer's group health plan. COBRA applies to employers with 20 or more FTE's (full time equivalents) who sponsor a group health plan.

Qualified individuals (employees who have lost their coverage) and their covered dependents have the option to elect the continuation of their coverage for 18 months. An 11 month extension of COBRA is available to individuals who experience a disabling event and have been deemed eligible for SSI (Supplemental Security Income) within the first 60 days of COBRA coverage. Employees and their covered dependents become qualified when the employee loses coverage through a qualified event which could be a reduction in work hours or loss of employment through voluntary or involuntary means. Qualified beneficiaries of the plan (a spouse or dependent) who lose coverage due to the death of the employee or divorce from the employee will have the option to continue their coverage for 36 months. Additionally, dependents who have reached the maximum coverage age allowed by the plan will be offered 36 months of COBRA coverage.

Individuals electing to continue their coverage will be paying the full cost of the coverage plus an additional 2% administration fee. Individuals electing COBRA under the 11 month disability extension may be charged 150% of the premium plus the 2% administrative cost. Most individuals under employer sponsored plans are not aware of the true cost of their health insurance because employers typically pay a good portion of those costs. Individuals experiencing a qualified event will receive notification of their options from the COBRA Administrator. Qualified individuals have 60 days from the date their coverage ended or from the date they received their notification (whichever is later) to make an election and 45 days to make their payment which must include payment for all months retroactive back to the date the coverage ended.

In the case of Flexible Spending Accounts, if the employee has not used up more than they have paid in to their account, COBRA will be offered through the end of the year for the remaining balance. Individuals who have overspent their FSA accounts will not be offered COBRA continuation for their FSA. Individuals on COBRA must make their payments on time as stated in the plan guidelines or their coverage will be cancelled. A 30 day grace period is allowed.


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