Health Care Reform:

Health Benefits Under the COBRA

Who Is Entitled to Benefits?

There are three elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, beneficiaries and events which initiate the coverage.

Plan Coverage

Group health plans for employers with 20 or more employees on more than 50 percent of the working days in the previous calendar year are subject to COBRA. The term "employees" includes all full-time and part-time employees, as well as self-employed individuals. For this purpose, the term employees also includes agents, independent contractors and directors, but only if they are eligible to participate in a group health plan.

Beneficiary Coverage

A qualified beneficiary generally is any individual covered by a group health plan on the day before a qualifying event. A qualified beneficiary may be an employee, the employee's spouse and dependent children, and in certain cases, a retired employee, the retired employee's spouse and dependent children.

Qualifying Events

"Qualifying events" are certain types of events that would cause, except for COBRA continuation coverage, an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the required amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.

The types of qualifying events for employees are:

• voluntary or involuntary termination of employment for reasons other than "gross misconduct"
• reduction in the number of hours of employment

The types of qualifying events for spouses are:

• termination of the covered employee's employment for any reason other than "gross misconduct"
• reduction in the hours worked by the covered employee
• covered employee's becoming entitled to Medicare
• divorce or legal separation of the covered employee
• death of the covered employee

The types of qualifying events for dependent children are the same as for the spouse with one addition:

• loss of "dependent child" status under the plan rules

Periods of Coverage3

3. The Omnibus Budget Reconciliation Act of 1986 contained amendments to the Internal Revenue Code and ERISA affecting retirees and family members who receive post-retirement health coverage from employers involved in bankruptcy proceedings begun on or after July 1, 1986. This article does not address that group.
4. In the case of individuals who qualify for Social Security disability benefits, special rules apply to extend coverage an additional 11 months.

Your Rights: Notice and Election Procedures

COBRA outlines procedures for employees and family members to elect continuation coverage and for employers and plans to notify beneficiaries. The qualifying events contained in the law create rights and obligations for employers, plan administrators and qualified beneficiaries.

Qualified beneficiaries have the right to elect to continue coverage that is identical to the coverage provided under the plan. Employers and plan administrators have an obligation to determine the specific rights of beneficiaries with respect to election, notification and type of coverage options.