A federal workplace law, the Consolidated Omnibus Budget Reconciliation Act, or COBRA (29 U.S.C. § 1162), requires your employer to offer you—and your spouse and dependents—continuing insurance coverage in either of the following situations:
You lose insurance coverage because your number of work hours is reduced.
You lose your job for any reason other than gross misconduct. Because the law is still relatively new and was a drastic change from Business as Usual, the courts are still grappling with the question of how egregious the workplace behavior must be to qualify as gross misconduct. So far, courts have ruled that inefficiency, poor performance, negligence, or errors in judgment on the job are not enough. There must be some deliberate, wrongful violations of workplace standards to qualify as gross misconduct.
COBRA was intended to extend access to group health insurance coverage to people who would otherwise be totally unprotected—and unlikely to be able to secure coverage on their own. The law applies to all employers with 20 or more employees. Under the law, employers need only make the insurance available; they need not pay for it. Employers may charge up to 102% of the base premium for continued coverage—the extra 2% thrown in to cover administrative costs.
Those covered under COBRA include:
1. Continuing Coverage
Qualified employees and former employees may elect to continue coverage up to 18 months after they quit or are fired or get laid off, or after a reduction in hours that makes them ineligible for coverage. Those who become disabled, however, can get COBRA coverage for 29 months—until Medicare payments typically kick in.
No one can choose to enroll in an insurance plan upon becoming ineligible for workplace coverage. COBRA extends only to those already enrolled when their health insurance coverage ceases.
In addition, COBRA provides that covered individuals must be given the right to convert to an individual policy at the end of the continuation period—although that coverage is usually significantly more expensive.
2. Coverage for Dependents
Beneficiaries or dependents may also elect to continue coverage for 18 months.
However, they may opt to have coverage continued for up to 36 months if any of the following occur:
3. Preexisting Conditions
COBRA addresses the most common health insurance bugaboo: denial of coverage for preexisting conditions.
Under COBRA, coverage must be offered regardless of any preexisting medical conditions. And, if an employee obtains new employment with coverage that contains exclusions or limitations for any such conditions, the former employer may not terminate coverage before the end of the COBRA coverage period. However, the employer may end coverage if a beneficiary such as a spouse is covered by another group health plan—as long as there is no significant gap in benefits
4. Enforcing COBRA
COBRA provides for a number of fines for employers and health insurance plan administrators who violate its requirements. However, the Act has so many complexities that no one can agree on exactly what circumstances release an employer from its requirements. And, frustratingly, there is no one place you can call to get help if you think your rights under COBRA have been violated. Parts of the law are administered by the U.S. Labor Department and other parts fall under the Internal Revenue Service—and the two agencies frequently refer COBRA complaints back and forth to each other.
If you have a COBRA-related question or complaint, you can try calling your local office of either of those agencies, but neither has a track record of actively enforcing COBRA requirements. Your employer is required to provide you with an explanation of your COBRA rights when you are enrolled in a group health care plan covering 20 or more employees. However, these materials are seldom well written or easy to understand.
In general, COBRA can be enforced only through an expensive lawsuit. That means that it typically can be used only by large groups of former employees who have been denied their rights to continue group health insurance coverage—and who can share the expense of hiring a lawyer and filing a lawsuit to enforce that right.
