What is the Consolidated Omnibus Budget Reconciliation Act?
Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed to protect employees from the loss of healthcare coverage in certain situations. Specifically, it allows an employee or an employee’s dependent who is a beneficiary under an employee’s healthcare plan to maintain health coverage when a qualifying event causes a loss of coverage. COBRA applies to employers with 20 or more employees.
Note: Some states have passed mini-COBRA statutes to help an employee maintain coverage when the federal law does not apply.
What is a Qualifying Event under COBRA?
A qualifying event is defined as:
- Death of a covered employee;
- Voluntary or involuntary termination, layoff, strike, reduction of hours, etc.;
- Divorce from a defendant beneficiary; or
- Dependent minor reaches an age of non-coverage under the employee’s plan.
Situations where an employee remains employed but voluntarily cancels healthcare coverage or when an employee loses coverage for not paying are not qualifying events.
What is the Period of Employee Protection under COBRA?
COBRA allows the employee to purchase continuation coverage for the following periods:
- Up to 18 months under no extenuating circumstances,
- 29 months if a person is disabled, and
- 36 months in case of divorce or widow(er).
The continued coverage can be equal to the terminated plan or any form of lesser coverage. COBRA, however, does not allow for an increase in coverage.
