Group Medical Insurance - COBRA and HIPAA Provisions
Consolidated Omnibus Budget Reconciliation Act (COBRA)
COBRA is a federal law that protects participants in group medical plans who are guaranteed continuation coverage for a certain time period if terminated for any reason except gross misconduct. Employees who are laid off are protected, not those fired for cause. COBRA rules apply to employers with a plan with twenty or more employees at any time during the year. The eligible party must elect COBRA coverage and pay the premium within 45 days. While the employer could opt to pay the premium, often it is the employee who shoulders this expense which may be up to 102 percent of the premium in effect.
For example, assume a family's health insurance premium is $1,000 a month. While an employee with the company, the employee assumed $450, the employer $550. Upon termination due to corporate downsizing, the employee now has to pay $1,020 which is 102 percent of the full $1,000 premium. Enumerated below are the events for which a terminated employee would qualify for continued coverage under COBRA:
- Termination: 18 months of continued coverage from the date of severance or 29 months if the employee is disabled.
- Termination from the plan due to a reduction in the employee's hours: 18 months of continued coverage from the date of severance or 29 months if the employee is disabled.
- Death of employee: dependent coverage extends to 36 months
- Dependent child no longer qualifies as such under the plan: this individual is eligible for 36 months of additional coverage.
- Employee becomes eligible to receive Medicare: this individual is eligible for 36 months of additional coverage.
- Divorce or legal separation: former spouse qualifies for 36 months of additional coverage
Health Insurance Portability and Accountability Act (HIPAA)
Individuals with at least 18 months of creditable coverage (group health plan, individual health insurance, Medicare, Medicaid and any state-specific programs) and without access to other health insurance must be allowed to enroll in an insurance policy.