Archive for the ‘COBRA Information’ Category

What is COBRA and How Does It Work?

Friday, July 3rd, 2009

If an individual has group health insurance through his or her employer, the individual, his or her spouse and dependents can continue that coverage for eighteen months if a “qualifying event” (causing the employee to lose insurance coverage) takes place. This right to obtain continued coverage under COBRA only applies with regard to group health plans for private employers which have had 20 or more employees in the previous calendar year, and to state and local government employees. The most common qualifying events are the employee’s termination (including the employee voluntarily quitting), or a cut in the employee’s hours which results in the employee no longer satisfying applicable minimum work hour requirements for insurance coverage. However, COBRA coverage is not an option if the employee is terminated for “gross misconduct.” Also, qualifying events triggering the right of a spouse or dependent of an employee to obtain extended coverage include the death of the employee. 


The employer must notify the health plan within 30 days of a qualifying event (an employee’s termination, reduction in hours, or death). Within 14 days afterwards, the health plan must notify the employee (or beneficiary) of his or her right to continue coverage. The employee or beneficiary must respond within 60 days if they wish to continue on the group health insurance plan, and then has 45 days after electing coverage to pay the initial premium.

The individual who chooses continued coverage will have to pay both the employee and employer portions of the premium plus a 2% service charge. The individual’s continuing premium cost may not exceed 102% of the premium cost for the full employee rate. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees, while COBRA participants generally pay the entire premium themselves. It is ordinarily considerably less expensive, though, than individual health insurance coverage.

This coverage may continue for eighteen months, as long as the premiums are paid. If the individual should join a new employer’s group health plan, the COBRA coverage is not automatically terminated. The individual has the option of either continuing the COBRA coverage for the full eighteen months or terminating it. Continuing COBRA coverage when joining a new plan may be helpful if plan participants are subject to exclusions or waiting period requirements under the policy. However, the individual may need to carry the premiums of both policies during this time.

If an individual was determined to be disabled under the Social Security Act within the first sixty days of COBRA coverage, the individual may choose to buy an additional eleven months of COBRA coverage, extending the COBRA coverage to twenty-nine months. If the individual chooses this option, any beneficiaries also receiving the COBRA coverage will be eligible for this extended period.

When the COBRA coverage ends, an offer will be made for an option to convert to an individual health plan if this option is generally available to active employees under the plan. Assuming the employee wishes to convert, he or she will want to determine if the conversion plan is affordable (it is likely to be more expensive than group coverage) and extensive enough, or if an individual needs to seek coverage elsewhere.

COBRA coverage may also be terminated early if after electing COBRA the individual joins another health plan (including Medicare) that covers all existing conditions. If the new plan does not cover a certain condition that COBRA is currently covering, or if you are still subject to a twelve-month pre-existing condition clause, you can maintain the double coverage.

COBRA Premium Reduction under the Stimulus Bill

Monday, April 20th, 2009

The American Recovery and Reinvestment Act of 2009 (known as the Stimulus Bill) provides a premium reduction to certain qualified individuals.  Individuals eligible for COBRA coverage who were involuntarily terminated by their employer on or after September 1, 2008 through December 31, 2009 who are eligible for COBRA and elect COBRA may be eligible to pay a reduced premium amount that is only 35 percent of the premium costs for the COBRA coverage.
The premium reduction for an individual ends upon eligibility for other group coverage (or Medicare), after 9 months from the beginning of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first.  The premium reduction provisions relate only to premiums for coverage periods beginning after the law was enacted –February 17, 2009.

If a person was terminated between September 1, 2008 and December 31, 2009 and was covered by an employer’s plan on their day of employment, the plan administrator should provide a notice of eligibility to elect COBRA and to receive a premium reduction.  Individuals involuntarily terminated during this period have the right to elect COBRA coverage even if they did not elect coverage when it was first offered; they may also do so if they did elect COBRA, but are no longer enrolled (for example, because they were unable to continue paying the premium). This election period begins February 17, 2009 and ends 60 days after the plan provides the required notice.

For more information the employer should be contacted directly to ask about getting the premium reduction, and how to reconcile any amounts that might have been overpaid after February 17, 2009.

Sheri has concentrated her law practice to the areas of Social Security Disability Law MORE...

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