COBRA lets employees and their families keep the employer’s group health coverage for a limited time after a job loss or cut in hours, usually by paying the full premium themselves.
| Item | Rule |
|---|---|
| Employers covered | Group health plans of employers with 20 or more employees (on more than half of typical business days in the prior year) |
| Events | Including voluntary or involuntary job loss (other than for gross misconduct) and a reduction in hours |
| Cost to the person | Up to 102% of the cost to the plan |
| Employer to plan | Notify within 30 days of the event |
| Plan to beneficiary | Election notice within 14 days of the employer’s notice |
| Time to elect | At least 60 days |
| Length of coverage | Limited; commonly 18 months after job loss or reduced hours, longer for some other events |
A restaurant group with 85 employees offers health coverage to staff averaging 30 or more hours a week. A server asks to drop to 20 hours a week while in school, which makes her ineligible under the plan. Nobody is fired, but the reduction in hours is a COBRA event because it causes her to lose coverage.
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The employer notifies the plan administrator within 30 days. The administrator sends the election notice within 14 days, and she has 60 days to choose. If the plan costs $620 a month and the employee paid $150 while eligible, COBRA can cost her up to $632.40 a month (102% of $620). Seeing that number, she compares it with a marketplace plan before deciding. Accurate hour records are what show when the eligibility change happened.
Hour reductions are the events most often missed, because nobody leaves. If your plan’s eligibility depends on average hours, review the average each measurement period and flag anyone who drops below it.
A warehouse worker leaves his job. While employed, he paid $180 a month and his employer paid $540, a total plan cost of $720 a month.
Under COBRA, the plan can charge him up to 102% of $720, or $734.40 a month. That is more than four times what he paid as an employee, which is why many people compare COBRA with other coverage options during the election period. HR gives him the plan cost figures in writing so he can make that comparison with real numbers.
Up to 102% of the plan’s cost, which usually means the person pays both what they paid before and what the employer used to pay, plus 2%.
For a limited time set by the law, commonly 18 months after job loss or reduced hours, and longer after certain other events. Check the plan’s notice for the exact period.
Federal COBRA applies to employers with 20 or more employees. Many states have their own continuation laws that cover smaller employers.
Yes. Voluntary job loss is a COBRA event, so employees who resign can generally elect COBRA.
No. The qualified beneficiary must elect it within the election period after receiving the notice.
Usually the person who elects it, up to 102% of the cost to the plan. Some employers choose to pay part of it for a period, for example in a severance agreement.
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