Consolidated Omnibus Budget Reconciliation Act (COBRA) - Explained
Supplemental Insurance Coverage
Written by Jason Gordon
Updated at April 6th, 2023
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
-
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
- Courses
What is the Consolidated Omnibus Budget Reconciliation Act?
Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed to protect employees from the loss of healthcare coverage in certain situations. Specifically, it allows an employee or an employee's dependent who is a beneficiary under an employee's healthcare plan to maintain health coverage when a qualifying event causes a loss of coverage. COBRA applies to employers with 20 or more employees.
Note: Some states have passed mini-COBRA statutes to help an employee maintain coverage when the federal law does not apply.
Next Article: Health Insurance Portability and Accountability Act (HIPAA) Back to: EMPLOYMENT LAWS
What is a Qualifying Event under COBRA?
A qualifying event is defined as:
- Death of a covered employee;
- Voluntary or involuntary termination, layoff, strike, reduction of hours, etc.;
- Divorce from a defendant beneficiary; or
- Dependent minor reaches an age of non-coverage under the employee's plan.
Situations where an employee remains employed but voluntarily cancels healthcare coverage or when an employee loses coverage for not paying are not qualifying events.
What is the Period of Employee Protection under COBRA?
COBRA allows the employee to purchase continuation coverage for the following periods:
- Up to 18 months under no extenuating circumstances,
- 29 months if a person is disabled, and
- 36 months in case of divorce or widow(er).
The continued coverage can be equal to the terminated plan or any form of lesser coverage. COBRA, however, does not allow for an increase in coverage.
Discussion Question
Why do you think the Federal Government is interested in protecting employee health coverage? How do you feel about additional state regulations in this area? Do you think the list of qualifying events is sufficiently broad to achieve these objectives? Why or why not? Is the time period for benefit protection sufficient? Why or why not?
DeletePractice Question
Marco works for ABC Corp., a large employer in New York state. Marco pays for health coverage for himself and his wife, Julie, under a plan that is sponsored by ABC Corp. After several years of marriage, Marco and Julie decide to divorce. After the divorce, Julie will no longer be an eligible beneficiary on Marco's health plan. What benefits does COBRA offer to Julie?
DeleteRelated Topics
- Employment Law (Intro)
- Who is an employee under the employment law?
- Subcontracting
- What characterizes the employer-employee, At-Will relationship?
- What are the major employment laws?
- What are the taxation requirements imposed upon employers?
- What is the Fair Labor Standards Act (FLSA)?
- Exempt Employee
- NonExempt Employees
- Family Medical Leave Act (FMLA)?
- Worker Adjustment and Retraining Act (WARN Act)?
- Occupational Safety and Health Act (OSHA)?
- Employee Retirement Income Security Act (ERISA)?
- Active Participant Status
- Defined Benefit Plan
- Pension Plan
- Accumulated Benefit Obligation
- Defined Contribution Plan
- Cash Balance Plan
- Pension Benefit Guaranty Corporation
- Blackout Period
- Benefit Allocation Method
- Multinational Pooling
- DB(k) Plan Definition
- Employee Contribution Plan
- Unit Benefit Plan
- Top Hat Plan
- Non-Discrimination Rule
- Alternative Minimum Cost Method
- Consolidated Omnibus Budget Reconciliation Act (COBRA)?
- Health Insurance Portability and Accountability Act (HIPAA)
- Workers Compensation Laws?
- Workers Compensation Coverage A Definition
- Workers Compensation Coverage B Definition
- Federal Unemployment Tax Act
- State Unemployment Tax Act
- Voluntary Termination
- Employment Verification Laws?
- Form I-9
- Workplace Privacy Laws?
- Background Checks
- Davis-Bacon Act
- Loudermill Rights
- Work Opportunity Tax Credit
- Work for Hire Agreement (Independent Contractor Agreement)
- Engagement Letter Definition
- Non-Compete Agreement
- Non-Solicitation Clause
-
Wrongful Termination Claim
- What are labor laws?
- Organized Labor
- Collective Bargaining Agreement
- Labor Union
- What are the major labor laws?
- Department of Labor
- What is the National Labor Relations Act?
- Unfair Labor Practice
- Right to Work Laws
- Labor Management Relations Act
- Labor Management Reporting and Disclosure Act