| Who Qualifies for COBRA | | | | contribution. Overall, eligible COBRA beneficiaries |
| COBRA benefits are available to certain individuals | | | | cannot be required to pay more than 102% of the |
| who are covered by a group health plan on the day | | | | monthly premium cost, with the 2% representing |
| before a qualifying event. Beneficiaries generally include | | | | administrative charges. |
| former employees; retirees; and spouses, former | | | | A common complaint is that COBRA can be too |
| spouses, or dependent children of qualified individuals. | | | | expensive for the unemployed, since the employer is |
| Directors, agents, and independent contractors may | | | | no longer subsidizing the cost. For this reason, a report |
| also qualify for COBRA benefits if they participated in | | | | by the Commonwealth Fund found that less than 10% |
| a qualifying health plan. A dependent may elect to | | | | of employees took advantage of COBRA benefits in |
| receive COBRA benefits even if the related employee | | | | 2006. Nevertheless, COBRA is frequently less |
| does not. | | | | expensive than the alternate cost of individual health |
| Private companies with 20 or more employees, state | | | | coverage. Because of the cost, participants selecting |
| and local governments, and other employee | | | | COBRA are commonly cases of adverse selection, i.e. |
| organizations are generally covered by COBRA. | | | | those with more serious and immediate health |
| COBRA "Qualifying Events" | | | | coverage needs. Recent federal government COBRA |
| COBRA health insurance is only available under certain | | | | subsidies will expire soon. |
| specified circumstances, including but not limited to: | | | | COBRA Coverage Disputes |
| - Employment termination on a voluntary or involuntary | | | | The COBRA plan administrator is required to provide |
| basis (except in the case of gross misconduct) | | | | an election notice when a beneficiary is qualified to |
| - Reduced hours of employment | | | | receive continue coverage. While infrequent, there are |
| - Medicare benefits take effect | | | | times when an administrator's determinations are |
| - Death, divorce, or legal separation of the covered | | | | challenged. According to the Employee Benefits |
| employee | | | | Security Administration, determinations involving group |
| Length of COBRA Coverage | | | | health plan coverage eligibility are not governed by |
| The time period during which COBRA is available | | | | ERISA's claims procedure regulation unless they relate |
| varies with the type of qualifying event. A plan may | | | | to a specific claim for benefits. |
| extend the benefit period, but cannot shorten the | | | | In Summary |
| required coverage period. COBRA benefits may be | | | | COBRA is a useful but costly benefit to employees |
| available for 18 to 36 months, depending on the | | | | who find themselves out of work unexpectedly. From |
| circumstances. Eighteen (18) months is an average | | | | an employer's perspective, compliance requirements |
| benefit period. | | | | may be complex. Multiple federal agencies have |
| The Cost of COBRA Benefits | | | | responsibility for various aspects of COBRA and |
| The beneficiary must pay a monthly premium for | | | | ERISA, including the Department of Labor, Treasury |
| COBRA insurance coverage. Many employees face | | | | Department, the Department of Health and Human |
| sticker shock when they realize that in addition to the | | | | Services, and the Internal Revenue Service. |
| typically small portion of the monthly health payment | | | | If you are an employer covered by COBRA, work |
| that was deducted from their paycheck, they now | | | | closely with an attorney experienced in COBRA and |
| must also pay the portion of the premium previously | | | | ERISA matters to insure regulatory compliance and |
| covered by their employer. In many cases this can be | | | | avoid disputes that may lead to litigation. |
| a payment 3-4 times larger than their earlier | | | | |