The purpose of COBRA is to allow people to keep their group health coverage even after your employment ends or you lose coverage as a dependent on a covered employee.
Here’s everything you need to know about COBRA.
What is COBRA?
If an employee changes job, gets fired, or get divorced as a dependent then he or she is at risk of losing group health plan benefit through his or her job. With COBRA, the employee and his or her dependents have the option of choosing to continue their group coverage for a limited amount of time.
Who is Eligible for COBRA?
There are three basic requirements to be eligible for COBRA:
- The group plan you are a part of must be covered by COBRA
- A qualifying event has to occur
- You have to be a qualified beneficiary
Generally, COBRA covers employers that have 20 or more employees on their group plan. But there are some exceptions where smaller companies with less than 20 employees could qualify.
COBRA doesn’t just apply to the employee but to those who are dependent on that health coverage, such as a spouse, former spouse or child.
The following events could make you eligible for COBRA:
- Termination or loss of hours of a covered employee (this does not apply if the employee was terminated for gross misconduct)
- Divorce or legal separation from covered employee
- Death of a covered employee
- Covered employee becoming eligible for Medicare
- A child no longer dependent on covered employee
How Does COBRA Work?
Usually, an employer will pay a large portion of the group health premium for his or her employees. The employee is no longer required to pay that premium when COBRA is in use. This means that person using COBRA has to now pay the full premium for their group health plan in addition to a 2% administrative charge.
How Long Does COBRA Coverage Last?
Depending on the circumstance, there are different coverage periods for COBRA.
|Qualifying Event||Maximum Period of COBRA Coverage|
|Termination (not because of gross misconduct) or loss of hours or employment||18 months|
|Employee enrollment in Medicare||36 months|
|Death of an employee||36 months|
|Divorce or legal separation||36 months|
|No longer a “dependent child” under health plan||36 months|