Continuing health care coverage

COBRA Health Care 

By law, you may be guaranteed continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), but you will have to assume the cost of coverage.

COBRA applies to employers with more than 20 employees (except churches, the federal government and the District of Columbia). This legislation requires an employer who maintains a group health insurance plan to provide employees with an option to remain covered by the employer’s plan for a specified period of time if the employees or their family members lose coverage upon the occurrence of certain events (such as reduced or terminated employment).

However, it’s important to note that COBRA provides for continued coverage under the employer’s existing plan, not a new form of coverage. Thus, employees who previously did not elect coverage either for themselves, their spouses, or their dependents may not elect continuation coverage that is broader in scope than the coverage they were provided during their employment.

Who is Covered?

To qualify for continuation coverage as a “covered employee,” an employee must be a participant in their employer’s group health insurance plan. 

If continuation coverage is elected, the employer may charge the employee or beneficiary up to 102% of the employer’s health insurance premium during the continuation period. The extra 2% is intended to reimburse the employer for administrative costs associated with providing continuation coverage.

What is the Coverage Period?

The period of continuation coverage is based on two classes of qualifying beneficiaries. For widows, divorced spouses, spouses of Medicare-eligible employees and dependent children who become ineligible for coverage (by virtue of age requirements), continuation coverage must be provided for at least 36 months.

Terminated employees and employees with reduced hours are eligible for only 18 months of coverage. If a qualified person wants to receive continuation coverage, they must elect to do so within a 60-day election period. The employer is not required, however, to provide retroactive coverage in this situation.

The continuation coverage under COBRA is a valuable component of an employee benefits package. With health care costs continuing to rise, having the option of continued coverage can be invaluable.

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