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What Is COBRA?

If there's one thing Congress is good for, it's passing laws with funny names. Congress passed The Consolidated Omnibus Budget Reconciliation Act in 1985. With a name like that, is it any wonder everyone just calls it COBRA?

So what is COBRA, and what does it mean for employers offering group health coverage?

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Keeping People Covered

COBRA makes it possible for employees — and their families — to keep their health insurance when they leave their job, lose their job, or have another “qualifying event.” Qualifying events include:

  • The death of the employee
  • A reduction in hours (because of layoff, “discharge,” resignation, or even a business downturn)
  • Divorce
  • A dependent child reaching an age where they're no longer covered (usually 19)

What Are Your Obligations Under COBRA?

The first thing to know about your obligations is this: unless you have a staff of 20 or more people, COBRA doesn't apply to you. If that's the case, you might be more interested to read about HIPAA, a related law that protects your employees' medical privacy and right to be insured.

If COBRA does apply to your employees, you have certain obligations under law:

  • You must notify an employee of their right to COBRA coverage after a “qualifying event.”
  • You must extend the offer of COBRA coverage for 60 days after notification

You don't have to pay for the COBRA coverage. The employee is responsible for paying the total premium of the policy, plus a 2% administration charge. So most people decline COBRA coverage — they can usually find an individual health policy for much less.

Even though the employee is paying their own premiums, the coverage is still part of your business’ group policy. That means that if a former employee or dependant files an expensive claim, the premiums on your entire policy could go up.

A former employee can remain on your group policy for up to 18 months under COBRA. A spouse or dependent child can remain on the policy for 36 months. People who qualify for disability can have an additional 11 months of coverage — but they have to pay 150% of the premium for the extra time.

Not sure exactly how COBRA might apply to you? Don't have a Human Resources manager to worry about it for you? Talk with a professional insurance agent. When you use our free online quote service, you'll be matched with agents licensed in your state. You can ask them questions, compare their offers, and work with the agent that's best suited to provide the advice and expertise your business needs.

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