COBRA Administration

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is the federal health care continuation law. COBRA requires group health plans to offer continued health care coverage to employees and to qualified beneficiaries of employees at the beneficiary's expense if employer-provided health coverage is lost.

Any employer who employed 20 or more employees on at least 50% of its typical business days during the preceding calendar year must comply with COBRA. Employers with fewer than 20 employees are granted a small employer exception and not subject to COBRA. Only common law employees are counted in determining the number of employees to qualify for a small employer exception. For all plan years on and after January 1, 2000, independent contractors, self employed individuals, or members of a corporate’s board of directors are not counted as common-law employees. Part-time employees and employees working outside the United States must be counted.

An employer that crosses the 20-employee threshold must begin to offer COBRA on January 1 of the year following the year they no longer qualify for the small employer exception.

The following events are "qualifying events" that make one eligible to receive COBRA benefits:

• Death of a covered employee
• Voluntary or involuntary termination of employment, except gross misconduct
• Reduction of hours, making the employee ineligible for benefits
• Divorce or legal separation (Separation does not apply in Pennsylvania)
• Covered employee becomes entitled to Medicare
• Dependent child ceases to meet the definition of a "dependent child"
• Employer's bankruptcy (applies only to retirees and their families)

The length of time that one is entitled to COBRA coverage depends on the qualifying event:

• Eighteen months for termination of employment and reduction of hours
• Thirty-six months for death of a covered employee, divorce or separation, Medicare entitlement, and a dependent child ceasing to be a dependent
• Extensions can be granted for multiple qualifying events in certain cases.

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The employer is responsible for notifying employees and their qualified beneficiaries of their COBRA rights when they first become covered under the group health plan. Subsequently, employers must re-notify employees and qualified beneficiaries when there is a COBRA qualifying event that leads to a loss of health plan coverage or other events related to COBRA continuation coverage, and provide them with the option to elect COBRA coverage. Additionally enployers are responsible for notifying COBRA participants of benefit and rate changes and for monitoring the duration of benefits under COBRA.

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The employer should remove the qualified employee from the invoice, using the end of the month in which the qualifying event occurred as the termination date. If the qualified individual elects COBRA, a completed COBRA election form and first month's premium are required to enroll the employee in our billing system. The individual will receive monthly statements from the Council's Employee Benefits Group and the employer will not be involved in any type of premium collection.

Employers also have the option of self-administering COBRA billing, in which case, the employer is responsible for the billing and collection of monthly premiums. The employer should keep the COBRA participant on their monthly invoice.

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This information is not intended for use without professional advice. While we have attempted to make this site as accurate as possible, it is only a summary. For more information, see our disclaimer.

Last updated on:  Thursday, November 04, 2004  Page: 

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