More than half of American workers receive health insurance through an employer-sponsored group health plan. Fortunately, a change in employment circumstances does not necessarily mean the sudden loss of health coverage, thanks to the Consolidated Omnibus Budget Reconciliation Act of COBRA.
How the Affordable Care Act (ACA) affects COBRA
COBRA is a multifaceted bill, but what it's mainly known for is its mandate that employees can continue to receive job-based health insurance coverage following a disruption or "qualifying event. Qualifying events cover a range of circumstances both sudden, such as layoffs, or anticipated, such as retirement. In any case, the purpose of COBRA continuation is to provide a buffer, giving workers time to shop for a new plan or, as is often the case, find another job with health coverage.
COBRA mandates that the scope of the coverage remains identical, meaning the only change employees can expect is in price.
This is because, whereas a portion was previously paid by the employer, the employee must now cover the entire cost of their premium one exception to this is found in some severance packages, in which an employee will continue to receive benefits following termination. While COBRA will always be more expensive than employer-sponsored health insurance, it's usually cheaper than an individual insurance plan — especially among those with pre-existing conditions.
Those entitled to COBRA coverage are referred to as "qualified beneficiaries," which means any employee on a company's group health plan. A qualified beneficiary can also be an employee's spouse, former spouse or dependent child — if they're covered by the same health plan, they're eligible for COBRA.
Private-sector employers with at least 20 full-time employees or the equivalent for at least half of the previous calendar year are mandated to provide COBRA coverage. Part-time employees must also be counted toward the employee benchmark.follow site
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For example, if a full-time employee works 40 hours per week, two part-time workers working 20 hours or four part-time workers working 10 hours are equivalent to one of the 20 full-time employees. It should be noted, however, that these are only the federal guidelines.
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While a layoff is the most common reason an employee loses healthcare coverage, there are a number of situations in which an employee or qualified beneficiary can suddenly lose coverage. A change in the benefits under the plan for active employees may apply to qualified beneficiaries.
The Importance of COBRA Compliance for Employers | DataPath Administrative Services
Beneficiaries also may change coverage during periods of open enrollment by the plan. COBRA establishes required periods of coverage for continuation health benefits. COBRA beneficiaries generally are eligible to pay for group coverage during a maximum of 18 months for qualifying events due to employment termination or reduction of hours of work.
Certain qualifying events, or a second qualifying event during the initial period of coverage, may permit a beneficiary to receive a maximum of 36 months of coverage. Coverage begins on the date that coverage would otherwise have been lost by reason of a qualifying event and can end when:. Special rules for disabled individuals may extend the maximum periods of coverage.
COBRA Continuation Coverage
If a qualified beneficiary is determined under Title II or XVI of the Social Security Act to have been disabled at the time of a termination of employment or reduction in hours of employment and the qualified beneficiary properly notifies the plan administrator of the disability determination, the month period is expanded to 29 months.
Some plans allow beneficiaries to convert group health coverage to an individual policy. In this case, the option must be given for the beneficiary to enroll in a conversion health plan within days before COBRA coverage ends. The premium is generally not at a group rate.
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The conversion option, however, is not available if the beneficiary ends COBRA coverage before reaching the maximum period of entitlement. After listening to the real-world needs, we created a system with seamless functionality that provides our client base with a reliable administrative solution. An employee's qualified beneficiary must contact the group health plan administrator within two months of an event, divorce or separation from the employee, or if the employee's child no longer qualifies as a dependent.
The employer's group health plan administrator must send a notice to the employee or beneficiary within two weeks of receiving information concerning the qualifying event.
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After that decision, the individual has 45 days in which to pay the first premium. Under federal law, employers might require individuals to pay for continuation of health care coverage under COBRA coverage.
The employer cannot charge more than the cost of the health care premium, but may levy up to a 2 percent charge for administration. By law, COBRA continuation coverage is available for either 18 months or three years, depending on the type of qualifying event. The employer's group health plan might opt to provide longer coverage than required under the statute. If the qualifying event is termination of employment or reduced working hours, and the former employee becomes eligible for Medicare in less than 18 months from the qualifying date, coverage for a spouse or any dependents may last for up to three years after the employee's Medicare eligibility date.
Related The Employer’s Guide to C.O.B.R.A. Self-Administration
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