Fair, & Prepared
Today, the vast majority of employees obtain health insurance through their employers. A law known as COBRA (which is an acronym for the Consolidated Omnibus Budget Reconciliation Act) requires employers to offer continued health-care insurance benefits at group rates to employees and their beneficiaries when a qualifying event occurs. COBRA provides a means by which employees and their covered family members can continue group health insurance coverage through employer’s health-care insurance plans when their employment is terminated.
COBRA requires group employer sponsored health plans, which are comprised of health plans sponsored by employers with 20 or more employees to offer employees and members of their families whose health coverage is ending under the employer’s group plan, the option to extend employer sponsored health coverage where coverage under the group plan would be ending. COBRA applies to group health insurance plans provided through employees in private industry and the government. There are a number of circumstances which can lead to the need to secure coverage through COBRA, including where the employee is terminated either involuntarily or by way of resignation, a reduction in the number of hours worked by an employee which results in the employee no longer qualifying for employer sponsored coverage, a divorce or a legally recognized separation, the death of an employee, or when an employee’s child is no longer considered a dependent.
Under COBRA, the employee or family member may qualify to keep the group health insurance plan benefits for a certain period of time, which depends upon the reason for losing the health insurance coverage. For instance, if the reason the coverage is terminated is because of the termination of employment or reduced work hours, the period is up to 18 months. If the reason is divorce, legal separation, death, or loss of dependent child status, the period is up to 36 months.
COBRA has specific requirements that must be followed by both the employer and employees. Notices must be provided to employees and their spouses at the time coverage under the applicable health insurance plan begins, advising the employee of the rights which apply under COBRA, including a legal description of the law. When the administrator of the health plan receives notification that a COBRA qualifying event has occurred (a reason for health insurance to terminate), it must send a formal legal notice concerning the ability to make an election to continue coverage no later than 14 days after the plan administrator receives notice that a qualifying event has occurred. COBRA mandates that an employee or a family member has responsibility for informing the plan administrator of a divorce or a legally recognized separation, the death of an employee, or when an employee’s child is no longer considered a dependent. Employers then have the responsibility of notifying the plan administrator of a qualifying event reported by the employee or plan participant.
COBRA allows the beneficiary at least 60 days from the date the election notice is provided to inform the plan administrator that the beneficiary wants to elect continuation coverage. The right to COBRA does not mean that the coverage is free. Individuals who elect to continue coverage under COBRA are required to pay the cost of the insurance plus a 2 per cent administrative fee (102 per cent of the employer’s actual cost of providing coverage under the applicable plan). Further, a failure to make premium payments when due will lead to the cancellation of coverage under the plan. There is a 45 day period after electing COBRA coverage to pay the initial premium.
When an employer has violated the provisions of COBRA, a plan participant or beneficiary may file a civil action in a federal court to recover damages, which may include actual damages for losses sustained as a result of the inability to secure coverage under COBRA, and the entry of a Court Order clarifying the right to future COBRA benefits. In addition, if the administrator of a COBRA plan does not supply health plan documents within 30 days of a written request by a former employee, a court may award up to $110 per day, plus reasonable costs and attorneys’ fees.
In July 2009, the Commonwealth of Pennsylvania passed what is known as a Mini-COBRA which provides employees of small businesses (2-19 employees), who receive health insurance from their employers, the right to purchase health insurance after employees leave employment for up to 9 months after their employment ends. A major difference between Mini-COBRA and the federal COBRA law is the required period of coverage because Mini-COBRA only applies for up to 9 months while the federal COBRA provides coverage for 18-36 months, depending upon the circumstances.