Confused by COBRA? We’ve Got You Covered!

By August 1, 2018 August 27th, 2018 Employee Benefits

Most employers agree that offering health insurance to their employees is a great way to encourage a healthy workforce and maintain talent. However, when that talent chooses to leave, or is let go, employers must be aware of their obligations under the Consolidated Omnibus Budget Reconciliation Act (COBRA), as well as their state’s applicable continuation laws, often referred to as mini-COBRA.

COBRA: A Federal Mandate

COBRA is a federal law that applies to employers with 20 or more employees and allows an employee to continue their group health plan coverage in most situations. It also affords the covered employee’s dependents the opportunity to continue this coverage independently of the employee, if applicable.

Events that can trigger COBRA eligibility include

  • termination of employment,
  • reduction in hours,
  • death of an employee,
  • divorce or legal separation,
  • the employee’s entitlement to Medicare,
  • or the loss of eligibility under the terms of the plan for a child of the employee.

Under COBRA, the maximum coverage periods are as follows:

  • 18 months for employee’s termination of employment or reduction in hours
  • 36 months for employee’s death, divorce or legal separation, employee’s entitlement to Medicare, or a child’s loss of eligibility under terms of the plan
  • 29 months for employee’s termination of employment or reduction in hours that is followed by a disability determination by the Social Security Administration

Administration of COBRA requires a thorough understanding of all provisions of the law. Employers must be aware of the timing requirements for notification to qualified beneficiaries of eligibility, election and payment timelines, and a variety of other specifics. Our content partner, Zywave, has provided a thorough overview of the law and its requirements in an easy-to-read format. You can view that overview here.

State Continuation

Because COBRA mandates only apply to employers with 20 or more employees, many states have implemented laws establishing continuation requirements for those groups with fewer than 20 employees. These laws vary from state to state, so employers must be aware of their state’s specific program, regardless of where their employees reside.

New Jersey

New Jersey’s state continuation is quite similar to federal COBRA and applies to employers who have fewer than 20 employees. For a robust comparison of the two laws, review this handy table.

New York

New York’s state continuation differs considerably from the federal law. The most notable difference is that the maximum coverage period is 36 months for all qualifying events. Therefore, an employee who loses coverage due to a termination of employment or a reduction in work hours would have a 36-month coverage period, unlike under COBRA where the maximum continuation period is 18 months. In addition, employers with over 20 employees must extend New York state continuation to their employees once they have exhausted the coverage period under COBRA, therefore giving all employees the 36-month period. This table highlights the differences and applications of both New York’s law and COBRA.

Help Is Available

Penalties and taxes for non-compliance are high, and failure to administer the program correctly can become very expensive. For many employers, this obligation can be burdensome, so they choose to outsource this process. However, it’s crucial that a reputable and properly-vetted third party administrator be utilized. An experienced insurance broker can offer guidance and direct employers to a suitable solution.

All insurance policies are different. Be sure to review your insurance policy for specific information about coverages available to you. Nothing in this post is meant to suggest a guarantee of coverage.