COBRA
-
Health Benefits
Developed
by the U.S. Department of Labor
Pension and Welfare Benefits Administration
Revised September 1998
One
of the first questions dislocated workers ask is:
what happens to my health insurance?
While
dislocated workers may lose health insurance
from their former employer, they may have the right to
continue health coverage under certain conditions.
Health continuation rules enacted under COBRA (the
Consolidated Omnibus Budget Reconciliation Act of
1986) apply to dislocated workers and their families
as well as to workers who change jobs or workers
whose work hours have been reduced, thus causing
them to lose eligibility for health insurance. This
coverage is temporary however and the cost is borne
by the employee.
To
be eligible for COBRA coverage, you must have been
enrolled in your employer's health plan when you
worked and the health plan must continue to be in
effect for active employees. In addition, you must take
steps to enroll for COBRA continuation benefits.
Q
Which employers are required to offer
COBRA coverage?
A
Employers with 20 or more employees are
usually required to offer COBRA coverage and
to notify their employees of the availability of
such coverage. COBRA applies to
private-sector employees and to most state and
local government workers. In addition, many
states have laws similar to smaller companies.
You should check with your State Insurance
Commissioner's Office to see if such coverage is
available in your state. (Call
801-538-3826 or
1-800-439-3805.)
Q
What if the company closed or went
bankrupt and there is no health plan?
A If there is no longer a health plan, there is no
COBRA coverage available. If, however, there is
another plan offered by the company; you may be
covered under that plan. Union members who are
covered by a collective bargaining agreement that
provides for a medical plan also may be entitled to
continued coverage.
Q How do I find out about COBRA coverage
and how do I elect to take it?
A Employers or health plan administrators must
provide an initial general notice if you are entitled
to COBRA benefits. You probably received the initial
notice about COBRA coverage when you were hired.
When you are no longer eligible for health
coverage, your employer has to provide you with
a specific
notice regarding your rights to COBRA continuation benefits. Here is the sequence of
events: First,
employers must notify their plan administrators
within 30 days after an employee's termination or
after a reduction in hours that
causes an employee to lose health benefits.
Next, the plan administrator must provide notice
to individual employees of their right to elect
COBRA coverage within 14 days after
the administrator has received notice from the
employer.
Finally, you must respond to this notice
and
elect COBRA coverage
by the 60th day after
the written notice is sent or the day health
care coverage ceased, whichever
is
later. Otherwise, you will
lose all rights to
COBRA benefits.
Spouses and dependent children covered under
your health plan have an independent right to elect
COBRA coverage upon your termination or
reduction in hours. If, for instance, you have a
family member with an illness at the time you are
laid off, that person alone can elect coverage.
Q If I elect COBRA, how much do I pay?
A When you were an active employee, your
employer may have paid all or part of your group
health premiums. Under COBRA, as a former
employee no longer receiving benefits, you will
usually pay the entire premium amount-that is, the
premium that you paid as an active employee
plus
the amount of the contribution made by your
employer. In
addition, there may be a 2 percent
administrative fee.
While COBRA rates may seem high, you will be
paying group premium rates, which are usually
lower than individual rates.
Since it is likely that there will be a lapse of a
month or more between the date of layoff and the
time you make the COBRA election decision, you
may have to pay health premiums retroactively-
from the time of separation from the company The
first premium, for instance, will cover the entire
time since your last day of employment with your
former employer.
You should also be aware that it is your
responsibility to pay for COBRA coverage even
if you do not
receive a monthly statement.
Although they are not required to do so, some
employers may subsidize COBRA coverage.
Q When does COBRA coverage begin?
A Once you elect coverage and pay for it, COBRA
coverage begins on the date that health care
coverage ceased. It is, essentially, retroactive. In
addition, the health care coverage you receive is
the same as it is for active employees.
Q How long does COBRA coverage last?
A Generally, individuals who qualify initially are
covered for a maximum of 18 months, but
coverage may end earlier under certain
circumstances. Those
circumstance include:
- Premiums are not paid on time;
- Your former employer decides to discontinue a
health plan altogether;
- You obtain coverage with another employer's
group health plan; (There may be some excep-
tion if your new employer's health plan ex-
cludes or limits benefits for a "preexisting"
condition-basically a medical condition
present before you enrolled in the plan. Please
see the discussion on HIPAA that follows.)
- You become entitled to Medicare benefits.
Employers may offer longer periods of COBRA
coverage but are only required to do so under
special circumstances, such as disability (yours or
a family member's), your death or divorce, or
when your child ceases to meet the definition of a
dependent child under the health plan.
Q Who can answer other COBRA questions?
A COBRA administration is shared by three federal
agencies. The Department of Labor (DOL)
handles questions about notification rights under
COBRA for private sector employees. The
Department of Health and Human Services
(HHS) handles questions relating
to state and
local government workers. The Internal Revenue
Service (IRS), Department of the Treasury; has
other COBRA jurisdiction.
More details about COBRA coverage are
included in the booklet
Health Benefits under
the Consolidated Omnibus Budget
Reconciliation Act.
Information on how to
obtain a copy the
DOL San Francisco
Regional Office at 415-975-4600. You may
obtain telephone numbers
for the nearest HHS
and IRS offices
by calling the Federal Information
Center at: 1-800-688-9889.