Glossary

What are COBRA benefits?

COBRA benefits, established under the Consolidated Omnibus Budget Reconciliation Act, allow employees and their dependents to continue employer-sponsored health insurance coverage after experiencing a qualifying event that would typically end their eligibility. This federal law ensures access to healthcare during transitional periods, providing a critical safety net for individuals and families.

What benefits does COBRA cover?

COBRA generally applies to group health plans provided by private-sector employers with 20 or more employees or by state and local governments. Covered benefits typically include:

• Inpatient and outpatient hospital care
• Physician visits
• Surgery and major medical services
• Prescription drugs
• Vision and dental care

Plans offering only life insurance or disability benefits are excluded from COBRA coverage.

Who is eligible for COBRA benefits?

Employees, their spouses, and dependents covered under an employer’s health plan are eligible for COBRA benefits if they experience a qualifying event. Common qualifying events include:

• Voluntary or involuntary job loss (excluding gross misconduct)
• Reduction in work hours
• Transition between jobs
• Death of the covered employee
• Divorce or legal separation

Beneficiaries typically have 60 days from the qualifying event to elect COBRA coverage.

How long does COBRA coverage last?

The standard coverage period under COBRA is 18 months. However, in certain circumstances, such as disability or additional qualifying events, coverage can extend up to 36 months.

Beneficiaries must notify plan administrators within the required timeframes to qualify for extensions and are responsible for paying the full premium plus a 2% administrative fee.

What are the costs of COBRA benefits?

COBRA beneficiaries pay the entire premium cost, including the portion previously covered by the employer, plus a small administrative fee (up to 2%). This makes COBRA coverage often more expensive than employer-subsidized health insurance but still an essential option for maintaining continuity of care.

How does COBRA impact businesses?

For employers, COBRA compliance demonstrates a commitment to employee welfare and aids in maintaining a positive company culture. However, it also introduces administrative responsibilities, including managing notifications, enrollment, and premium collection.

How can employers ensure compliance with COBRA?

To remain compliant, employers must:

• Provide timely notifications of COBRA eligibility to beneficiaries
• Accurately calculate and collect premiums
• Manage coverage elections and ensure proper documentation

Regular audits and adherence to Department of Labor (DOL) guidelines can help prevent compliance issues and associated penalties.

What are alternatives to COBRA benefits?

Alternatives to COBRA include:

• Joining a spouse’s health insurance plan
• Purchasing individual coverage through the Health Insurance Marketplace
• Exploring short-term health insurance options

Employees should compare costs, coverage, and provider networks to determine the best option for their circumstances.

How can plan holders make an informed decision?

Choosing COBRA benefits involves weighing the costs, coverage period, and healthcare needs against other available options. Consulting with a benefits advisor or using online comparison tools can help individuals make informed decisions about their health insurance coverage during transitional periods.