The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that requires most employers to extend group health plan coverage to covered employees, spouses and/or dependents that would otherwise lose coverage when a qualifying event occurs.
All employers that maintain a group health plan are subject to federal COBRA rules unless either:
COBRA covers only group healthcare plans, including the following:
Disability income plans and life insurance plans are not included.
COBRA rights must be offered for each separate plan sponsored by the same employer.
Any employee who is covered by a group health plan on the day before a qualifying event (explained later) is a qualified beneficiary covered by COBRA, unless that employee was terminated for gross misconduct.
Qualified beneficiaries also include the employee’s dependent children and spouse if they are covered under the plan on the day before a qualifying event, again unless the covered employee was terminated for gross misconduct. Children born or adopted during a COBRA continuation period also are qualified beneficiaries.
Qualifying events under COBRA are events that cause a loss of coverage under the health plan. A qualifying event occurs when a covered employee, the employee’s spouse or dependent children lose coverage under the plan because:
If an employer offers retiree medical benefits under its group health plan, the employer’s filing for bankruptcy is also a qualifying event with respect to affected retiree participants.
These are qualifying events only if the event causes a covered employee or the covered dependents to lose coverage under the health plan. A loss of coverage includes an increase in the premiums or contributions required to be paid by the employee or covered dependents.
A leave approved under the Family and Medical Leave Act (FMLA) does not count as a qualifying event for COBRA purposes, because the employer is required to allow the employee (and dependents) to continue health coverage during the leave. However, a qualifying event occurs on the last day of the FMLA leave if the employee:
The qualifying event (from which notice requirements and the length of the COBRA period are measured) occurs on the last day of the FMLA leave, even if the employee allowed coverage to lapse or declined to continue coverage during the FMLA leave. Although the employer generally may require reimbursement of any health plan premiums paid by the employer on the employee’s behalf during an FMLA leave, the employer may not condition the right to COBRA coverage upon reimbursement of these premiums. In addition, the date of the qualifying event is not affected by any state or local law that may require coverage for a longer period of time than that required under the FMLA.
The maximum coverage periods under COBRA are:
However, a special rule applies to most healthcare flexible spending account plans. These plans are generally required to offer COBRA coverage only until the end of the plan year in which the qualifying event occurs, plus any period after the plan year covered by “carryover” funds, up to 18 months after the qualifying event.
Generally, qualified beneficiaries must pay the entire cost of COBRA coverage. The premium charged may not exceed 102% of the cost (including both the employee and employer-paid portions) attributable to similarly situated active employees. For the additional 11 months of extended COBRA coverage due to a disability determined by the Social Security Administration, the premium charged may not exceed 150% of the total premium paid with respect to an active employee.
The qualified beneficiary must pay the initial COBRA premium within 45 days of making the COBRA election. The initial premium paid must include the amount necessary for coverage retroactive to the date of the qualifying event. From that point forward, each premium must be paid according to the payment schedule required by the health plan and within the grace period (which must be at least 30 days from the due date) allowed for receipt of premiums.
The period for COBRA coverage will end automatically if:
A “general notice” of COBRA rights and obligations must be sent to employees and their covered spouses within 90 days of the beginning of health plan coverage for the employee or the employee's spouse. The general notice must include certain information, including:
The Presidential Proclamation on March 13, 2020, declaring a National Emergency concerning the COVID-19 outbreak also resulted in regulatory changes extending various timeframes applicable to all group health, disability and other employee welfare benefit and employee pension benefit plans subject to ERISA or the Internal Revenue Code. Those plans must disregard the period from March 1, 2020, until 60 days after the announced end of the National Emergency or such other date announced by the Department of Labor (the “outbreak period”). The dates may ultimately be extended for up to one year from the following normal time limits:
With respect to group health plans and their sponsors and administrators, the outbreak period shall be disregarded when determining the date for providing a COBRA election notice....
A “continuation coverage election notice” must be given to each employee or beneficiary by the plan administrator within 14 days after the plan administrator receives notice from the employer of the occurrence of a qualifying event. (The employer must also notify the plan administrator within 30 days of the qualifying event.) It is important to note that each qualified beneficiary has a separate election right, and the notices must be sent so that they reach each qualified beneficiary. A notice sent to the employee or employee’s spouse is sufficient notice for dependent children residing with the individual to whom such notice was sent.
The Department of Labor has also developed a sample election notice that employers and plans may use to satisfy this requirement, and a copy of that sample is available at:
A “notice of unavailability of continuation coverage” must be provided by the plan administrator within 14 days of receipt of a request for COBRA coverage from an individual, if the plan administrator determines that the individual is not eligible for coverage.
As soon as practicable after a plan administrator determines that COBRA coverage is being terminated before the end of the maximum coverage period, a notice of “notice of early termination of continuation coverage” must be provided to each qualified beneficiary explaining why the coverage is being terminated.
In general, all required notices must be sent by first class, certified or registered U.S. mail, addressed to the employee and spouse (if both are covered under the health plan) at the last known home address. Plans must keep complete and accurate records of all notices required by COBRA.
In addition to the notices that must be provided by the plan administrator, covered employees, covered dependents and qualified beneficiaries must also notify the plan administrator of certain events that may affect coverage, such as:
The plan must establish reasonable procedures to be followed by individuals when notifying the plan administrator of such events. If the plan fails to establish written procedures, any reasonable method of giving notice must be accepted.
The Department of Labor, on behalf of participants of nongovernmental plans, may assess a fine of up to $119 per day for an employer’s COBRA notice violation, accruing until the notice is issued. Each notice failure carries its own fine, so fines can become significant. Additionally, a special tax may be assessed by the Internal Revenue Service against an employer for failure to comply with any of COBRA’s provisions. The excise tax is equal to $100 per day (or $200 per day if there is more than one qualified beneficiary). The Internal Revenue Service is given the authority to waive the excise tax if the failure to comply is due to “reasonable” cause.
Minnesota adopted a mini-COBRA statute that extends the protections of the federal COBRA law in several important regards. First, Minnesota law makes COBRA protections applicable to all group health plans that are subject to state regulation, including those for employers with less than 20 employees. In addition, the Minnesota laws can provide more generous coverage to participating employees and their dependents, so employers and plan administrators must be aware of both the federal and state requirements to ensure compliance with all applicable provisions. As a general rule, when there is inconsistency between the federal and state requirements, the employer and plan administrator should adopt the provision that provides the more generous or lenient treatment to the employee and their dependents.
Under the federal COBRA law, when a participating employee, their spouse or their dependents enrolls in Medicare, the employer is allowed to terminate that person’s coverage. However, under Minnesota’s mini-COBRA laws, an employer is not allowed to terminate a qualified participant’s COBRA continuation coverage when the participant enrolls in Medicare; instead, the participant must be allowed to finish the participant's entire period of allowable COBRA coverage regardless of Medicare enrollment status.
Generally speaking, Minnesota’s mini-COBRA provides longer periods for the continuation of coverage under COBRA protections in regard to most qualifying events. For example and in addition to the continuation of coverage when a participant enrolls in Medicare coverage (as discussed previously), Minnesota’s protections expand coverage periods in the following situations:
Minnesota law allows a plan administrator or employer to charge only 100% of the premium paid by the employer to a disabled employee electing continuation coverage. No administration fee is permitted.
An employee participant’s divorced spouse may also continue coverage under the participant’s group health plan. If a divorced spouse exercises this right, Minnesota law caps the costs that may be assessed to the divorced spouse at 102% of the cost to other similarly situated covered spouses who are not divorced.
The Uniformed Services Employment and Reemployment Rights Act (USERRA) requires a group health plan to continue health insurance coverage under the plan for employees serving in the uniformed services who will lose coverage as a result of active military service to the extent required by USERRA. USERRA also permits those employees to elect coverage for their dependents if the employee’s dependents will lose coverage under a group health plan as a result of the employee’s active duty service. If an employee is serving in the uniformed services for no more than 31 days, coverage shall continue as if the employee were in active service with the employer.
If the absence is for a period longer than 31 days, the employee has the right to continue coverage for up to 24 months or until the date after the employee is required to, but fails to, apply for a return to active employment as required under USERRA (if earlier). As a plan design feature, many plans provide that continuation coverage under USERRA and COBRA run concurrently.
Employees who are eligible for COBRA continuation coverage are not limited in their eligibility for Marketplace coverage or for a tax credit under the ACA. They can apply for Marketplace coverage at HealthCare.gov or by calling (800) 318-2596; TTY (855) 889-4325). Through the Marketplace, they can also learn if they qualify for free or low-cost coverage from Medicaid or the Children's Health Insurance Program (CHIP). Not only will the Marketplace program provide more choices, but it will often result in a lower cost for insurance for the employee and any covered dependents. To qualify for a special enrollment in a Marketplace plan, an individual must select a plan within 60 days before or 60 days after losing any job-based coverage. Employees who need health coverage in the time between losing their job-based coverage and beginning coverage through the Marketplace (for example, if they or a family member needs medical care), will often elect COBRA coverage from their former employer's plan for a short period of time. COBRA continuation coverage will ensure you have health coverage until the coverage through the Marketplace plan begins.
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) prepared An Employer’s Guide to Health Benefits Under COBRA, which is available at:
Additional materials concerning COBRA are on the Employee Benefits Security Administration section of the Department of Labor and available at:
or by calling the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) National Office:
A model COBRA election notice has been provided by the U.S. Department of Labor at (download under Cobra Model Notice):
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