COBRA & State Continuation

COBRA and State Continuation – Frequently Asked Questions

COBRA InsuranceThe thought of losing your health insurance coverage can be terrifying. Here are some frequently asked questions (FAQs) and their answers regarding COBRA insurance and State Continuation health care coverage:

What is COBRA insurance?

COBRA is a federal law passed in 1985 that permits employees to retain health care coverage under their employer’s group plan for a temporary amount of time after experiencing a qualifying major life event that would result in coverage termination.

What does COBRA stand for?

COBRA stands for Consolidated Omnibus Budget Reconciliation Act.

Does my employer offer COBRA insurance?

COBRA insurance is generally required for private-sector employers (with a group health plan) that employ at least 20 individuals for more than 50 percent of its business days during the previous calendar year. COBRA also applies to group health plans sponsored by most state and local governments. The law does not apply to plans sponsored by the Federal Government or by churches and some church-related organizations.

What is State Continuation?

State Continuation is very similar to COBRA but applies to businesses that employ fewer than 20 employees. State Continuation laws vary from state to state.

Learn more about your state’s insurance continuation laws. You may also contact your state’s Department of Insurance for specific information.

What is considered a qualifying event?

Examples of qualifying events that typically result in a termination of coverage:

  • Job loss (for reasons other than gross misconduct)
  • Reduction in work hours
  • Divorce or legal separation from the covered employee
  • Covered employee becomes eligible for Medicare
  • Death of the covered employee

What determines COBRA eligibility?

Individuals who were covered under their employer’s group health plan prior to a qualifying event are eligible for COBRA. In addition, spouses and dependent children are also eligible if covered under the same group plan prior to the qualifying event.

If we have a child or adopt while on COBRA, are those children considered qualified beneficiaries?

Yes. The U.S. Department of Labor states that “Any child born to or placed for adoption with the covered employee during the period of continuation coverage is automatically considered a qualified beneficiary” regardless of whether the qualifying event occurred before, on, or after such date if they are enrolled within 30 days of birth or adoption.

What benefits are covered?

Under COBRA, you must receive the same health plan coverage that is available to active employees and their families. Generally, this is the same coverage you had prior to the qualifying event.

When must I decide to elect COBRA coverage?

If you are entitled to receive COBRA coverage, you must be given an election period of at least 60 days to make a decision whether or not to choose continuing coverage.

If I waive COBRA coverage, can I elect coverage at a later date?

If you waive COBRA coverage and later change your mind, you must be permitted to revoke your waiver and elect COBRA coverage so long as this is done within the election period. Coverage begins on the date you revoke the waiver.

How long can I receive COBRA coverage?

Individuals who choose COBRA can receive coverage for up to 18 months. Some beneficiaries may qualify for an 18-month extension (total of 36 months) if they meet certain requirements.

Who pays for continuation coverage?

The cost of continuing health care coverage is usually paid for by the individual.

How much is COBRA insurance?

The cost is variable by plan, but cannot exceed 102 percent of the total cost for similarly covered individuals who have not had a qualifying event.  (Note: If the company subsidizes premium costs for its employees, then ‘total cost’ includes both the portion previously paid by the employee and the portion previously paid by the employer.)

Can my COBRA coverage be canceled before the maximum coverage period?

Yes. A group health plan may cancel an individual’s coverage for the following reasons:

  • Premiums are not paid in full on a timely basis
  • The employer ceases to maintain a group health plan
  • A qualified beneficiary starts receiving coverage under another group health plan
  • A qualified beneficiary becomes entitled to Medicare benefits
  • A qualified beneficiary commits an act (such as fraud) that would result in coverage loss for a participant who was not receiving continuing coverage

My company closed and there is no health plan. Am I eligible for COBRA insurance?

If there is no longer a health plan, COBRA is not available. Union members covered under a collective bargaining agreement that provides for a medical plan may be entitled to continuing coverage.

Are there alternatives to COBRA?

Every person’s situation and needs are different. If you choose to waive COBRA, you may find more affordable or more generous coverage options through other group health plans (such as a spouse’s coverage), through private or government-sponsored exchanges, or through Medicaid.

 

For more information on COBRA, visit the Department of Labor website.

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