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COBRA Insurance: What is COBRA and How Does It Work?

Many American workers have been laid off as a result of non-essential businesses having to close or reduce operations due to the COVID-19 pandemic. While unemployment benefits have been expanded by states across the country, health coverage has been less certain.

Coverage mandated by the Consolidated Omnibus Budget Reconciliation Act (COBRA) may be an option for laid-off employees to continue using your current group health insurance plan, even if they are no longer working for you. 


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What is COBRA?

COBRA is a federal program that was created to allow workers and their families the right to continue group health benefits in some cases. If employees are eligible for COBRA, then they may be able to continue their coverage for up to 18 months, and in some cases even longer.

When does COBRA apply?

COBRA applies when certain triggering events occur, which include:

  • Voluntary job loss (quitting)
  • Involuntary job loss (being laid off or fired)
  • Reduction in hours
  • Death
  • Divorce
  • Other life events

Who is required to provide COBRA?

COBRA generally applies to private sector employers that have 20 or more employees and sponsor group health plans, as long as certain requirements are met. It also generally applies to employment in state and local governments.

COBRA does not apply to churches, church-related organizations, or the federal government.

Additionally, many states have laws that extend COBRA requirements to employers that employ fewer than 20 workers. If you have questions about COBRA in relation to your business, ask a lawyer

How do former employees become eligible for COBRA continuation coverage? 

COBRA eligibility depends on the health insurance policy offered to your employees. In addition to the employee having been a participant in a covered plan, in order to extend benefits, your group health plan needs to be in effect for the remaining employees working for you. Thus, if you are no longer in business, then they may not be eligible for COBRA benefits.

How do my employees know whether my health plan offers COBRA benefits?

If your employer-sponsored health plan is subject to COBRA, your employees should have received a notice of eligibility with the plan’s Summary Plan Description (SPD). The SPD is supposed to be sent within the first 90 days that they become enrolled in the plan. Each member of the group health plan that is covered by the plan is also supposed to receive a copy of COBRA rights and eligibility within the same timeline. 

How does a COBRA notice work?

Although there are some nuanced exceptions, employees should receive a notice of their eligibility for COBRA benefits within 60 days of a qualifying event, such as termination. If you have questions about the notice requirements that apply to your business, ask a lawyer.

What does a COBRA notice include?

A notice of COBRA rights should include the following information:

  • An explanation of how to enroll in COBRA benefits
  • The deadline for deciding
  • Who to contact in order to enroll
  • The date coverage will begin
  • The amount of time the coverage will last
  • The amount recipients will have to pay for the monthly premium
  • When recipients will have to make monthly payments (due date)
  • If the policy is retroactive, any premium for the retroactive coverage period
  • The address for sending payments 
  • Recipients’ rights and obligations, including COBRA extension options
  • Early termination clauses

How long do they have to decide?

Departed employees have at least 60 days to decide, beginning from the date they receive notice or the date on which they would lose coverage, whichever is later.

Each beneficiary of the employer sponsored group health policy is entitled to receive an independent notice and option to enroll in COBRA coverage. The decision of each qualified beneficiary regarding whether or not to enroll is independent of other beneficiaries. For example, in the case of spouses with dependent children, one spouse could enroll and elect coverage for themself and the children, and the other spouse could choose not to enroll at all. 

What will COBRA coverage look like for recipients?

For those who enroll in COBRA, their policy should look like the plan they had while employed. However, any changes to group insurance options for current employees will affect their plan, as well. 

How long will COBRA last?

COBRA coverage lasts for at least 18 months, but can be extended for an additional 18 months under certain circumstances. In the case of reduction of hours or termination, qualified beneficiaries are entitled to an 18-month coverage period.

Who pays the monthly COBRA payment?

Depending on your policy as an employer, recipients may be required to pay for a continuation of their health care plan. The maximum amount they would be required to pay is 102 percent of the cost of the premium. Those who exercise the disability extension provisions may have to pay more.

Ask a lawyer about COBRA coverage and more

If you have questions about government relief or need legal help due to the coronavirus pandemic, Rocket Lawyer is here for you. Get free legal advice and essential documents to safeguard your business in the Coronavirus Legal Center. You can also contact the Rocket Lawyer CARES support team toll-free at (877) 885-0088, Monday through Friday, from 6am – 6pm PST.

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