COBRA Ultimate Guide

What is COBRA?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law requiring companies with 20 or more employees to offer continuing health care coverage to employees, spouses, and dependent children for a limited time after the loss of employment or other qualifying events.

It’s important to note that plans sponsored by the Federal Government, churches, and some church-affiliated organizations are not subject to COBRA requirements. In addition to federal regulations, some states have their own laws that set individual requirements for COBRA, which may include employers with fewer than 20 employees.

Who is eligible for COBRA?

Employees are eligible for COBRA if they experience a qualifying event that causes them to lose coverage in their employer-sponsored health care plan. The spouse and dependent children of the employee may also be eligible.  

What is a qualifying event?

For the employee:

  • Employment loss for any reason other than gross misconduct
  • Reduction in work hours that results in loss of health care coverage

For the spouse and dependent children of the employee:

  • Employment loss for any reason other than gross misconduct
  • Reduction in work hours that results in loss of health care coverage
  • Death of the employee
  • Employee enrolls in Medicare
  • Divorce or legal separation

How much does COBRA cost?

The employee is responsible for paying the full health plan premium plus up to a 2% administrative fee.

When do employees need to enroll in COBRA?

Employees, their spouses, and dependent children will have 60 days from the date of the COBRA notice to sign up for continuing coverage. Everyone previously covered isn’t required to elect to continue coverage. Individual members of the family can choose to continue coverage.

How do employees enroll in COBRA?

Plans are required to include COBRA information for employees in their Summary Plan Description (SPD), and employees are supposed to receive the SPD within 90 days of enrolling in the plan.

What if employees change their mind about electing COBRA coverage?

Employees must be allowed to revoke the waiver of coverage and choose to continue coverage as long as it is within the allowed election period.

How long does COBRA coverage last?

For loss of employment or reduction in work hours, the length of coverage is 18 months. Coverage can last up to 36 months for other qualifying events. In either instance, coverage ends if the other benefits are obtained.

Can an employee extend coverage past 18 months?

Sometimes a second qualifying event can allow the employee, spouse, or dependent children to continue coverage. Details about a second qualifying event should be included in the SPD.

What happens if an employee doesn't enroll in COBRA?

Employees who fail to enroll within the 60-day window lose their right to continue health insurance coverage through their employer.

What if a COBRA payment is missed?

If a payment is missed or late, coverage can be terminated. Plans can accept late payments, but they’re not required to.

What role do employers play in COBRA?

A plan doesn’t act until the employer, employee, or beneficiary notifies them. Employers, however, are required to notify the plan within 30 days of the qualifying event if the qualifying event is:

  • Reduction of work hours or termination of employment
  • Death of the employee covered by the plan
  • The employee covered by the plan becomes eligible for Medicare, or
  • Employer bankruptcy

Employers are also required to provide the employee a written notice that explains their COBRA rights.

What happens if employers do not follow COBRA guidelines?

This is an important and popular question. Employers can face steep penalties and fines from the IRS, the Department of Labor, and other lawsuits. Penalties can be extensive, and employers can find more information in our article about COBRA noncompliance.

Why choose Ameriflex for COBRA compliance administration?

  • Employers are held 100% harmless for any negligence by Ameriflex.
  • We invoice off the number of employees enrolled in the group health plan – including outside dental and vision carriers at no additional cost.
  • Our team is an Aetna Strategic Cobra Partner and a Humana preferred partner.
  • We include all DOL-required employer, employee, and carrier notifications.
  • Employers get access to real-time mailing confirmation of all notices, including paid-through reports, mail-sent reports, subsidy reports, and more.
  • Our platform sends COBRA eligibility to carriers through secure fax or email, with an electronic audit trail.
  • We provide takeover of pending or enrolled qualified beneficiaries.
  • We offer premium collection and remittance.
  • Each client gets a dedicated implementation team and account manager to provide day-to-day support.
  • We invoice off the medical carrier bill only and include outside dental & vision carriers at no cost.

Why use a benefits administrator?

Finding a COBRA benefits administrator you can trust can save your organization time and money both now and in the future by eliminating the responsibility and risk for the employer and their HR department. Ameriflex provides risk mitigation and communication throughout the process. Read more to see how outsourcing with Ameriflex can help your organization.

COBRA is a required aspect of most organization’s benefits plan, and COBRA compliance is one of our areas of expertise. These are just a few common questions about the employer and employee aspects of COBRA. More detailed information can be found on the Department of Labor Website.