Navigating COBRA: What Employers Should Know
Perhaps you’ve had to downsize your business due to the pandemic, cutting hours or even jobs. If this has happened in your business, your employees could be left without insurance coverage. That’s why COBRA is available. In navigating COBRA, here’s what employers should know.
Definition of COBRA
COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985. This is a Federal law requiring employers who have 20 or more employees and offer healthcare benefits, to be able to offer the option of continuing healthcare coverage in the case of termination, loss of job, reduction of hours, or other events. COBRA coverage is available for between 18 and 36 months, depending upon the type of event and the beneficiary. The rule is up to 18 months when an employee is terminated or their hours are reduced, or up to 36 months of coverage for other reasons.
While the COBRA Act covers the nation, each state may have variations. It’s important to know the laws in your state. For example, employers should know that Virginia mandates a “mini-COBRA” statute for employers with fewer than 20 employees that requires “each employee and other covered person under such a policy written notice of the availability of the option chosen and the procedure and time frame for obtaining continuation or conversion of the group policy.” This notice must be provided within 14 days of when the employer becomes aware of the date their employee is no longer eligible under the group health insurance policy.
As an Employer, What Do I Need to Know in Navigating COBRA?
Employers should be familiar with the law and how it works. Some of the most common questions include: How do you sign up employees? Who is eligible? What events make someone eligible for COBRA? What benefits are offered by COBRA? Who pays for COBRA coverage?
Who is eligible for COBRA?
Someone who has healthcare coverage under group plan up to the day before the event causing the coverage loss. This can include:
- Their spouses and dependents
- Retirees (unless eligible for Medicare)
- Partners in a partnership
Who is not eligible?
- Employees not yet eligible for your group healthcare plan
- Employees who declined coverage in your group healthcare plan
- Persons enrolled in Medicare benefits
What benefit plans are included in COBRA?
COBRA benefit plans can include the following, but do not have to include life or disability insurance, or retirement plans.
- Medical spending accounts
- Dental, vision and hearing
- Prescription drugs
- Alcohol and substance abuse plans
- Mental health care
What are the qualifying events for COBRA coverage?
Employers should know the triggers, or qualifying events, that require you to offer COBRA coverage. There are many, including your company’s bankruptcy, or an employee’s:
- Voluntary or involuntary employment termination (unless for gross misconduct)
- Reduction in employment hours
- Divorce or legal separation of a spouse from a covered employee
- Availability of Medicare coverage
- Change in status, such as ineligibility of a dependent on a parent employee’s coverage
- Active military duty (when not maintaining healthcare coverage)
- Not returning to work following a leave of absence
It is your job, as the employer, to communicate to the employee their initial rights under COBRA to continue benefits following a qualifying event and when they join the COBRA plan. You also have 30 days for most losses to notify your plan administrator, or 60 days in the case of divorce or change of status by a dependent. Your administrator must notify the person entitled to COBRA benefits within 14 days of being notified themselves.
For Questions About COBRA, Contact Benefit Providers
There are numerous more rules in navigating COBRA that employers should know. That’s why we’re here. If you have questions about COBRA, the laws or its administration, please contact Benefit Providers/ECCA Payroll Services at 703-370-2226 or firstname.lastname@example.org. We’re glad to offer you a free consultation to see how we can help.