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Health Care Reform:

Health Insurance & Affordable Care Act

Health Benefits Under the COBRA

Introduction

Health insurance programs allow workers and their families to take care of essential medical needs. These programs can be one of the most important benefits provided by an employer.

There was a time when group health coverage may have been terminated when a worker lost his job or changed employment. That changed in 1986 with the passage of health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA). Now, terminated employees or those who lose coverage because of reduced work hours may be able to buy group coverage for themselves and their families for limited periods of time.

If you are entitled to COBRA benefits, your health plan must give you a notice stating your right to choose to continue benefits provided by the plan. You have 60 days to accept coverage or lose all rights to benefits. Once COBRA coverage is chosen, you may be required to pay for the coverage.

This article is designed to:

  • provide a general explanation of COBRA requirements
  • outline the rules that apply to health plans for employees in the private sector
  • spotlight your rights to benefits under this law

What Is the Continuation Health Law?

Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA)1 health benefit provisions in 1986. The law amends the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated.

COBRA contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available in specific instances. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.

The law generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments.2 The law does not, however, apply to plans sponsored by the Federal government and certain church-related organizations.

Group health plans sponsored by private sector employers generally are welfare benefit plans governed by ERISA and subject to its requirements for reporting and disclosure, fiduciary standards and enforcement. ERISA neither establishes minimum standards or benefit eligibility for welfare plans nor mandates the type or level of benefits offered to plan participants. It does, however, require that these plans have rules outlining how workers become entitled to benefits.

Under COBRA, a group health plan ordinarily is defined as a plan that provides medical benefits for the employer's own employees and their dependents through insurance or another mechanism such as a trust, health maintenance organization, self-funded pay-as-you-go basis, reimbursement or combination of these. Medical benefits provided under the terms of the plan and available to COBRA beneficiaries may include:

  • inpatient and outpatient hospital care
  • physician care
  • surgery and other major medical benefits
  • prescription drugs
  • any other medical benefits, such as dental and vision care

Life insurance, however, is not covered under COBRA.

1. The original health continuation provisions were contained in Title X of COBRA, which was signed into law (Public Law 99-272) on April 7, 1986.
2. Provisions of COBRA covering state and local government plans are administered by the U.S. Public Health Service within the Department of Health and Human Services.

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