COBRA Bites Part I: Basic Questions About COBRA Rules

There has been a lot of talk about "budget reconciliation" with regards to the passage of Obama's health care regime. Budget reconciliation affecting healthcare is not new and is not limited to the Democrats -- with COBRA serving as a prime example.

The Reagan administration used the reconciliation method to pass The Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1986. COBRA places compliance rules onto many businesses, requiring employers who maintain group health plans to give employees, and their dependents, the opportunity to continue coverage at affordable group rates in events where they would otherwise lose coverage.

But enough backgroud -- what do you need to know about COBRA as it affects your business?

Although this list is not exhaustive, here are some questions you should be asking yourself, if you maintain a single-employer group health plan.

Does COBRA apply to my business? COBRA does not apply to group health plans sponsored by employers normally employing less than 20 employees on a typical business day in the preceding calendar year.  Be careful on who you count as employees. Each full-time employee is counted as one and each part-time is counted as a fraction, based on the hours worked.  But you are not required to count independent contractors, but be careful that you aren't misclassifying them, either.    

Does my business offer a "group health plan"? Plans that provide health care to employees, either directly, through insurance, reimbursement, an onsite facility or through a cafeteria plan or other flexible benefit arrangement are deemed as providing "group health plans".

My business offers a fringe benefit plan that is otherwise exempt from income tax -- is it exempt from COBRA?  It might still be susceptible to COBRA, even if it is otherwise excluded from income tax.  

COBRA is an area of law riddled with nuances. Have a look at the IRS page on COBRA or at the Department of Labor Website.

Stay tuned for more info about what to do if COBRA does indeed apply to your business' health benefits offerings.  

Related Resources:

• Update: Cobra Subsidy Extension Approved by House  (FindLaw's Law & Daily Life)
• COBRA Continuation Health Coverage FAQ  (FindLaw)
• Treasury Regulations on COBRA (IRS)