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13.7 Continuation of Coverage Under COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)

This law requires employers with 20 or more employees to offer continuation of health coverage to eligible employees and their dependents for up to 18 months following certain qualifying events, including:

  • Termination of employment (except for termination due to cause as defined by federal law)
  • Reduction in hours that results in loss of full-time eligibility
  • Coverage may be extended up to 29 months if the employee qualifies for Social Security disability benefits.

Coverage for dependents may be extended for up to 36 months following certain qualifying events, including:

  • Death of the employee
  • Divorce or legal separation
  • The employee becoming entitled to Medicare
  • Loss of dependent eligibility status

Employees must be informed of their right to continue coverage within 14 days of a qualifying event. The employee or beneficiary then has 60 days to notify the employer of their decision to elect continuation coverage.

Individuals electing COBRA continuation coverage are responsible for paying premiums to the employer, which may be up to 102% of the total cost of coverage. The continuation coverage:

  • Does not require evidence of insurability and provides the same benefits as the group plan
  • Includes coverage for pre-existing conditions if they were covered under the original group policy
  • Must offer dependent coverage if such coverage was included under the group plan

COBRA continuation coverage will terminate under the following circumstances:

  • Required premium payments are not made on time
  • The employer no longer maintains a group health plan
  • The employee becomes eligible for Medicare benefits (dependents may remain covered)
  • The employee enrolls in another group health plan
  • The employee elects to convert to an individual health policy

Individuals must be notified of their COBRA continuation rights at two key points: first, when the group health plan is initially established or amended to include continuation coverage, and second, when a qualifying event occurs.

Quiz​

1. What is the standard maximum duration of COBRA continuation coverage for employees after a qualifying event?

A. 6 months

B. 12 months

C. 18 months

D. 36 months

Correct Answer: C

Rationale: COBRA generally provides up to 18 months of continuation coverage for employees following qualifying events like termination or reduction in hours.

2. Under COBRA, how long can dependent coverage continue after events such as divorce or death of the employee?

A. 12 months

B. 18 months

C. 24 months

D. 36 months

Correct Answer: D

Rationale: Dependents may receive up to 36 months of continuation coverage for specific qualifying events.

3. How long does an employee or beneficiary have to elect COBRA coverage after being notified?

A. 14 days

B. 30 days

C. 45 days

D. 60 days

Correct Answer: D

Rationale: Individuals have 60 days to elect continuation coverage after being notified of their rights.

4. What is the maximum premium an employer may charge for COBRA continuation coverage?

A. 100% of the premium

B. 102% of the premium

C. 110% of the premium

D. 125% of the premium

Correct Answer: B

Rationale: COBRA allows employers to charge up to 102% of the total premium, including administrative costs.

5. Which of the following events will terminate COBRA continuation coverage?

A. Filing a claim

B. Moving to another state

C. Failure to pay premiums on time

D. Changing doctors

Correct Answer: C

Rationale: COBRA coverage ends if required premiums are not paid in a timely manner.