• COBRA allows former employees or family members to continue health coverage under the employer’s group health plan for up to a maximum of 18 months.
• The continuation of coverage is only available if the employee is terminated, retires, suffers a reduction in hours worked (making the employee ineligible for coverage), is in-between jobs, dies, or becomes divorced.
• Group health plans for employers with 20 or more employees on a typical business day in the previous calendar year are subject to COBRA.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) amended the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code, and the Public Health Service Act to provide continuation of an employee’s group health insurance coverage that otherwise might be terminated.

When is COBRA available?

COBRA applies to group health insurance plans maintained by private-sector employers and sponsored by most state and local governments. Under COBRA, former employees (or retirees) or their families (spouses, former spouses, and dependent children) who may lose employer-based health insurance coverage may be able to continue the coverage under the employer’s group health plan for up to 18 months. However, exceptions to this time limit may apply to disabled individuals and family members. Additional rights may be granted under state law.

This continuation of coverage, however, is only available when coverage is lost due to certain specific events, such as:

• Voluntary or involuntary job loss
• Reduction in the hours worked
• Transition time while unemployed
• Death
• Divorce

Employers subject to COBRA

Employers with 20 or more employees are usually required to offer COBRA coverage and to notify their employees of the availability of such coverage.

Group health plans for employers with 20 or more employees on a typical business day in the previous calendar year are subject to COBRA. Both full-time and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time.

COBRA premiums

Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves (up to 102 percent of the premium is allowed).

ERISA governs group health plans

Group health plans sponsored by private-sector employers generally are welfare benefit plans governed by ERISA and subject to its requirements for reporting and disclosure, fiduciary standards, and enforcement. ERISA requires that these plans have rules outlining how workers become entitled to benefits. Link to ERISA requirements