The Consolidated Omnibus Budget Reconciliation Act is a federal law that allows employees to continue their employer-sponsored health insurance coverage for a limited time after they leave their job. COBRA coverage can also extend to certain dependents and other beneficiaries who would otherwise lose their coverage.
COBRA is an important part of the Employee Retirement Income Security Act, which is also a federal law that sets minimum standards for pension and health plans in private industry.
COBRA’s main purpose
COBRA allows individuals to continue their health insurance coverage under their employer’s plan, even if they would normally lose this coverage due to a qualifying event. This may include termination of employment, reduction in work hours or certain life events, such as divorce or the death of a covered employee.
COBRA eligibility
To be eligible for coverage, individuals must have had an employer’s health plan on the day before the qualifying event occurred. In addition, the qualifying event must have led them to lose their coverage. Individuals also must be able to pay the full cost of the coverage, including any administrative fees that may apply.
COBRA coverage period
COBRA coverage typically lasts for a limited period. For most qualifying events, the maximum coverage period is 18 months. It can extend to 29 months for certain events involving disability and up to 36 months for certain other events, such as the death of a covered employee or divorce.
COBRA administration
The employer administers COBRA. ERISA, as the overarching law, sets forth certain requirements that employers must follow when offering this coverage. For example, ERISA requires employers to provide participants with a summary plan description that outlines their rights and benefits.
ERISA also establishes certain fiduciary responsibilities for employers and plan administrators, including the duty to act in the best interests of plan participants and beneficiaries. Employers must ensure that coverage administration is fair and in accordance with the law. Also, employers are responsible for collecting premiums from participants.
By understanding how COBRA works and their rights under the law, individuals can make informed decisions about their health care coverage and ensure that they receive the proper benefits.
