COBRA 101: Employers’ obligations under the law
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, employers are required to continue offering health insurance benefits to workers and their covered dependents for a specified period after they leave the organization.
The law applies to all employers that have 20 or more workers and group health insurance plans (including self-insured plans). Note: Some states have lower minimums concerning the number of employees.
Under COBRA, an employee and any qualified beneficiary may elect to continue health coverage if certain qualifying events occur, including voluntary or involuntary termination, layoffs and even reductions in working hours.
Qualified beneficiaries are spouses and dependent children who are covered under the plan the day before the qualifying event occurs. They have rights to COBRA coverage separate from the employee. Thus, a spouse and children could elect to continue coverage under the employer’s plan even if the terminated employee does not.
The law requires you to notify your health plan administrator within 30 days if one of these qualifying events occurs: an employee’s termination, death, reduced hours of employment, entitlement to Medicare or the company’s bankruptcy. (It’s up to the employee to notify you of changes in marital status, a dependent’s status or a disability that would trigger eligibility for COBRA coverage.)
The plan administrator then has 14 days to notify the employee and beneficiaries of their right to purchase continuation coverage. The employee (and family members) have 60 days to make their decision.
You may require the employee to pay up to 102% of the cost of the plan for maintaining benefits. (The extra 2% is designed to cover any administrative costs incurred.)
