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Understanding the benefits of COBRA

One of the most beneficial federal statutes has an especially ominous nickname: COBRA. The name stands for Congressional Omnibus Budget Reconciliation Act. The statute was passed in 1985 to assist employees whose group health insurance was discontinued, either because the employee's job was terminated or because the employer decided to discontinue the coverage.

COBRA requires employers to continue the health insurance coverage for employees, their spouses and dependent children upon the happening of certain events. The law applies to all private-sector employers with 20 or more employees. Qualifying events for COBRA coverage include

  • Termination of the employee's employment for any reason other than gross mis-conduct;
  • Reduction in the employee's hours of employment
  • Covered employee becomes eligible for Medicare
  • Divorce or separation of the spouse from a covered employee
  • Death of the covered employee.

An employee seeking COBRA coverage must have been enrolled in the employer's health insurance plan on the day before the occurrence of a qualifying event.

An employee must be given at least 60 days to elect COBRA coverage after health plan coverage terminates. A spouse married to an employee to whom COBRA applies is considered a beneficiary and may independently decide to choose continued coverage under COBRA.

Coverage under COBRA is generally more expensive than coverage under the employer provided plan, but the employee must be provided the same coverage under the COBRA continuation coverage. Depending upon the event that gave rise to COBRA coverage, continuation coverage may last for 18 or 36 months.

Ensuring the availability of continued health coverage under COBRA can be a complex task, and the assistance of an attorney experienced in such matters can be very helpful.

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