How Does COBRA Insurance Work?

The COBRA health coverage plan grants eligible employees and their families the right to keep their group health benefits from their former employer's health plan even after termination of employment or experiencing changes at work.

This article will explore in detail how COBRA insurance works. If you have questions about your rights to continued health insurance coverage, it might help to consult with a local employment law attorney. They can help you navigate the paperwork and the many deadlines involved in COBRA coverage.

Eligibility for COBRA Insurance

You must meet the following conditions to qualify for COBRA coverage:

• Plan coverage: Your employer's group health coverage must be subject to COBRA law. This generally includes all private-sector employers with 20 or more employees, as well as state and local governments. Federal government employers are not subject to COBRA. But they have similar rights under the Federal Employees Health Benefits Program (FEHB).
• Qualified beneficiary: You are a "qualified beneficiary" of your current health plan. Qualified beneficiaries include employees, their spouse, former spouses, and their dependents.
• Qualifying event: You lost coverage due to a "qualifying event." These events include voluntary or involuntary job loss, reduced working hours, or other life events, such as getting divorced and losing coverage you had under your spouse’s plan.

Even if you work for a small employer, you might still have the right to continued coverage. Many states have similar laws that apply to plans offered by employers with fewer than 20 employees. These programs are often called “mini-COBRA.” Your state insurance commissioner’s office can provide more information.

How Does COBRA Work When You Leave a Job?

Qualified beneficiaries are not automatically enrolled in COBRA health insurance. The COBRA process follows a timeline that requires each party to take action within a specific timeframe.

The timeline generally includes the following important deadlines for COBRA benefits:

• The employer has 30 days to notify the plan administrator of a qualifying event related to your employment. However, you must inform the administrator if the qualifying event is a divorce, legal separation, or a child losing dependent status. The deadlines may vary depending on the group health insurance plan.
• The plan administrator must send an election notice to you within 14 days after they receive notice of the qualifying event (job loss, reduced working hours, major life change)
• Each qualified beneficiary then has 60 days to decide whether to sign up for COBRA.

Qualified beneficiaries are entitled to at least 18 months of COBRA coverage when the qualifying event is the employee's loss of employment or reduction in hours. For other qualifying events, the minimum amount of coverage is 36 months. In some cases, you may receive an extension.

Plan Coverage

COBRA continuation coverage is not required for all employer-sponsored health plans. COBRA only covers health insurance plans sponsored by employers with at least 20 employees on more than 50% of their typical business days in the previous calendar year. This includes both total and part-time employees. However, COBRA counts each part-time employee as a fraction of a full-time employee. Some state laws also apply coverage to companies with fewer than 20 employees.

Who Is a Qualified Beneficiary?

For COBRA health insurance, qualified beneficiaries include the employee and the following family members:

• Spouse
• Former spouse
• Dependent children

These beneficiaries qualify for COBRA health insurance if the employee's group health plan previously covered them. The group health coverage should be in effect at least a day before a qualifying event, and the employer's group health plan should still be in effect.

In addition, COBRA may also consider retired employees, spouses, and dependent children as qualified beneficiaries if the employer goes bankrupt.

If a child is born or adopted during COBRA coverage, they are automatically eligible for COBRA coverage.

Qualifying Events

Qualifying events cause you to lose your group health insurance coverage. The type of qualifying event often determines which beneficiaries can continue their health care coverage. It also affects the duration of the COBRA coverage.

The following are qualifying events for eligible employees that could result in loss of group health coverage.

• The employee lost their employment for reasons other than gross misconduct
• The employer reduces an employee’s working hours

For the spouses and dependent children of the covered employee, qualifying events include:

• The covered employee lost their employment for reasons other than gross misconduct
• The covered employee experienced a reduced number of working hours
• The covered employee became entitled to Medicare
• The covered employee and the spouse divorce or legally separate
• Death of the covered employee

The loss of dependent child status is also considered a qualifying event for a dependent child. Group health plans that cover a child on their parent's plan should continue until the child reaches 26 years old.

Who Pays for COBRA Coverage?

You will most likely be paying your insurance premiums under COBRA. Unfortunately, COBRA health coverage is usually more expensive than the options you had with your employer. This is because an employer often covers a part of the insurance premium for active employees.

The exact amount of COBRA premiums will vary. However, it is usually cheaper than purchasing an individual health plan from your insurance company. Be sure to compare the cost of COBRA with other plan options, such as your spouse's insurance, Medicaid services, the Health Insurance Marketplace, the military, or a health coverage tax credit.

How Do I Learn About My Cobra Coverage?

Your group health plan often provides you and your beneficiaries with notices explaining your COBRA rights. The Summary Plan Description usually contains a description of your COBRA rights. After participating in the group health plan, you should receive your notice within 90 days.

Group health plans should also provide covered employees and their spouses with a general notice within 90 days. The general notice also describes their COBRA rights.

How Long Can I Wait to Pick Cobra Coverage?

If you are eligible to choose COBRA coverage, you can decide within 60 days if you want to continue the group health plan. This period starts either when they provide you with an election notice or when you lose your insurance coverage.

Note that each of the qualified beneficiaries can decide whether they want to choose COBRA coverage. So, for instance, if you and your spouse are beneficiaries of the health plan, you can choose separately if you wish to elect COBRA coverage. For dependent children, either the employee or the spouse can elect on their behalf.

What Happens If a Company Refuses to Offer COBRA?

Failure to send an employee notice of COBRA coverage can result in significant fines for the employer. Under the Employee Retirement Income Security Act (ERISA), the U.S. Department of Labor (DOL) can penalize employers up to $110 per day for as long as the violation occurs.

Employees can also sue their employer for medical expenses that should have been covered by COBRA. If your employer failed to notify the plan administrator of your qualifying event or didn’t notify you of your right to continued coverage, they may be liable for medical expenses and attorney’s fees you incur.

Get Help with the COBRA Process

Job loss and loss of health insurance can be highly stressful. There are many options and variables to consider when deciding how to move forward. Even if the process is followed to the letter, you’ll still have important decisions to make.

A local employment attorney experienced in COBRA claims can guide you through these difficult decisions. They can provide more detailed answers to your questions about how COBRA applies to your unique situation. They will also offer helpful legal advice about your COBRA rights.

If your employer failed in their duties under COBRA, an attorney can help you file a legal claim and represent your interests in court.

FindLaw’s directory of experienced employment attorneys can help make the process a little easier. You can find qualified legal professionals in your state and even in your city who know the COBRA process and can protect your rights.