COBRA rules and regulations
Basic information about offering and managing COBRA:
COBRA defined
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) mandated many health plans to offer continuation of coverage to "qualified beneficiaries" following termination of the individual's coverage under the plan. COBRA coverage must be identical to the coverage provided to similarly situated active employees. You are allowed to charge up to 102% of the premium for COBRA continuation (150% for disabled beneficiaries and their dependents after the initial 18 months).
All organizations offering a group health plan must offer COBRA,
except:
- Those employing less than 20 employees for less than 50% of their typical business days during the preceding calendar year (all full-time and part-time employees, owners and officers, regardless of their eligibility for the group health plan, need to be included in the calculation).
- Church plans
- Federal government plans
Qualifying for COBRA
Each qualified beneficiary should receive the same health plan benefits as regular employees of the company or organization and their dependents. Priority Health follows the COBRA statute as to who is eligible for COBRA coverage. If an employee (or former employee) is not eligible under the COBRA statute, they are not eligible for COBRA under Priority Health.
"Qualified beneficiaries" include:
- Employee
- Employee's spouse
- Employee's dependent child who was covered under the plan on the day before a qualifying event
- Newborn child or child placed for adoption with the covered employee during the COBRA continuation period
Qualifying events
An employee qualifies for COBRA coverage for certain time periods depending on their "qualifying event" (an event that would typically cause an individual to lose health plan coverage).
The beneficiaries receive:
- 18 months of coverage for
- Voluntary termination
- Involuntary termination (excluding termination for gross misconduct)
- 29 months of coverage for
- 36 months of coverage for
- Death of an employee
- Employee's Medicare entitlement
- Divorce or legal separation
- Dependent child ceasing to be a dependent
(Note: The spouse and/or dependents are the only qualified beneficiaries for these events.)
COBRA notification
You need to send several communications about COBRA coverage, including:
- Notice of right to COBRA coverage (for employees and their spouses)
- Notice to plan administrator
- Notice to qualified beneficiaries
- Notice of COBRA election period
- Notice of retroactive premium payment period
- Notice of prospective premium payment period
Maintaining COBRA compliance
Your plan administrator manages your actual COBRA coverage, but there are some steps you can take to avoid COBRA penalties:
- Maintain proper compliance
- Develop sources to inform you of COBRA lawsuits and addendums
- Update your compliance program as required
- Establish your company philosophy on unclear COBRA issues
- Treat similar COBRA situations in a similar manner
