COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1986. The purpose of the act was to require employers that have a group health insurance plan to offer temporary coverage to employees who have had a change in employment status. This meant that an employee could continue with the employers group health plan if they experienced a "qualifying event." Individuals that are considering applying for COBRA coverage should make sure they are informed on what is required.
- A qualifying event is considered any change in employment status, such as being terminated or laid off from an employer. There are five types of qualifying events that can trigger COBRA coverage. These include the death of an employee, termination or reduction of hours, divorce, Medicare eligibility, and the loss of dependency for a covered child. A qualifying event may also be referred to as a "triggering event."
- There are certain conditions that need to be met in order for an employer to be obligated to provide COBRA to a former employee. A triggering event needs to occur and cause a loss of group plan coverage. When these two conditions have been met a qualifying event occurs in which an employer if obligated to offer COBRA.
- There are two mandatory items that need to be sent to an employer and an employee that pertain to COBRA. These are the initial notice and the qualifying notice. The initial notice communicates the rights and obligations of plan participants. The qualifying notice will reference the qualifying event that obligated the employer to offer COBRA. If these notices are not sent or the content is incorrect, litigation can occur.
- Once an employee experiences a qualifying event, the plan administrator must notify the individual or any qualified beneficiary of their election rights within a fourteen day period. This window starts once the plan administrator has been notified of the qualifying event by either the employer or qualified beneficiary. If the plan administrator has not been notified of the qualified event their obligation to notify individuals of their election rights is not required.
- There are certain health plans that exist that are not subject to COBRA, including small employer and certain church plans. A small employer plan exempts COBRA when less than twenty people are employed per day during the previous calendar year. Certain types of church plans also do not need to offer COBRA. These can include health plans from a private college that is considered a church plan by the IRS.
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