Insurance: COBRA FAQ

the Department of Labor

  • What does COBRA do?

  • Who is covered by COBRA?

  • What events are covered by COBRA?

  • What period of time does COBRA allow coverage to continue?

  • What notification requirements must the employer follow?

  • What about premiums and payments ? How are these handled?

  • Was COBRA changed at all by the 2009 stimulus package?

  • How can I apply for the COBRA premium subsidy?

  • Can I get a refund for some of the COBRA payments I made before the stimulus package was passed?

  • Can I still get the premium subsidy if my employer closed or went bankrupt?

    Q: What does COBRA do?

    A: The Consolidated Omnibus Budget Reconciliation Act ("COBRA") gives workers who lose their health benefits the right to choose to continue group health benefits provided by the plan under certain circumstances.

    COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

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    Q: Who is covered by COBRA?

    A: The law generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments. COBRA provisions covering state and local government plans are administered by the Department of Health and Human Services.

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    Q: What events are covered by COBRA?

    A: Several events that can cause workers and their family members to lose group health coverage may result in the right to COBRA coverage. These include:
    • Voluntary or involuntary termination of the covered employee's employment for reasons other than "gross misconduct"
    • Reduced hours of work for the covered employee
    • Covered employee becoming entitled to Medicare
    • Divorce or legal separation of a covered employee
    • Death of a covered employee
    • Loss of status as a "dependent child" under plan rules

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    Q: How long can COBRA coverage to continue?

    A: Under COBRA, the employee or family member may qualify to keep their group health plan benefits for a set period of time, depending on the reason for losing the health coverage. The following represents some basic information on periods of continuation coverage:

    QUALIFIED BENEFICIARY

    QUALIFYING EVENT

    PERIOD OF COVERAGE

    Employee
    Spouse
    Dependent Child

  • Termination
  • Reduced Hours
    		•

    * 18 months

    Spouse
    Dependent Child

  • Employee entitled to Medicare
  • Divorce or legal separation
    		•

    36 months

    Dependent Child

  • Loss of dependent child status
    		•

    36 months

    * This 18-month period may be extended for all qualified beneficiaries if certain conditions are met in cases where a qualified beneficiary is determined to be disabled for purposes of COBRA.

    However, COBRA also provides that your continuation coverage may be cut short in certain cases.

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    Q: What notification requirements must the employer follow?

    A: An initial notice must be furnished to covered employees and spouses, at the time coverage under the plan starts, informing them of their rights under COBRA and describing provisions of the law. The plan's summary plan description ("SPD") must also contain COBRA information.

    When the plan administrator is notified that a qualifying event has happened, it must in turn notify each qualified beneficiary of the right to choose continuation coverage.

    COBRA allows at least 60 days from the date the election notice is provided to inform the plan administrator that the qualified beneficiary wants to elect continuation coverage.

    Under COBRA, the covered employee or a family member has the responsibility to inform the plan administrator of a divorce, legal separation, disability or a child losing dependent status under the plan.

    Employers have a responsibility to notify the plan administrator of the employee's death, termination of employment, reduction in hours or Medicare entitlement.

    If covered individuals change their martial status, or their spouses have changed addresses, they should notify the plan administrator.

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    Q: What about premiums and payments? How are these handled?

    A: Qualified individuals may be required to pay the entire premium for coverage up to 102% of the cost to the plan. Premiums may be higher for persons exercising the disability provisions of COBRA. Failure to make timely payments may result in loss of coverage. Premiums may be increased by the plan, although premiums generally must be set in advance of each 12-month premium cycle. Individuals with COBRA coverage may be responsible for paying all costs related to deductibles, and may be restricted by catastrophic and other benefit limits.

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    Q: Was COBRA changed at all by the 2009 stimulus package?

    A: The American Recovery and Reinvestment Act of 2009 (ARRA) made an important change to the costs of COBRA. Specifically, if you're eligible for COBRA and you were involuntarily laid off or discharged between September 1, 2008 and December 31, 2009, you may be eligible for a reduced premium amount that is only 35% of the premium costs for your COBRA coverage. You can get this reduced premium or premium subsidy for up to nine months.

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    Q: How do I apply for the COBRA premium subsidy?

    A: If you were involuntarily laid off or discharged between September 1, 2008 and December 31, 2009 and you were covered by your employer's health plan on the last day you were employed, the health plan's administrator should tell you how to elect COBRA and your eligibility for the lower premium. Your employer can also give you the information you need.

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    Q: Can I get a refund for some of the COBRA payments I made before the 2009 stimulus package was passed?

    A: No, you can't get a refund of 65% of the premiums you've paid before the stimulus package was passed and lowered the COBRA premiums. However, if you qualify, you can take advantage of the lowered premium now, for up to nine months.If the administrator of your employer's health plan hasn't already done so, you should ask your employer about how to apply for the lower premium. Your employer should also be able to help you recover any amounts you may have overpaid after February 17, 2009 (the date the stimulus package became law).

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    Q: Can I still get the premium subsidy if my employer closed or went bankrupt?

    A: No. If you lost your job because your employer shut down or filed for bankruptcy protection, you're not eligible for the reduced COBRA premiums.

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    Information provided by the Department of Labor.
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