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:

  1. Termination: 18 months of continued coverage from the date of severance or 29 months if the employee is disabled.
  2. 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.
  3. Death of employee: dependent coverage extends to 36 months
  4. Dependent child no longer qualifies as such under the plan: this individual is eligible for 36 months of additional coverage.
  5. Employee becomes eligible to receive Medicare: this individual is eligible for 36 months of additional coverage.
  6. 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.



Health Savings Accounts

Related Articles
  1. Insurance

    What You Need To Know About COBRA Health Insurance

    We go through everything you need to know about COBRA so that you can decide if it's right for you.
  2. Insurance

    Find Secure And Affordable Post-Work Health Insurance

    Learn how you can avoid financial catastrophe - without Medicare.
  3. Retirement

    6 Benefits You're Required by Law to Offer Your Employees

    Learn about the benefits that a business must offer to employees, such as family and medical leave, as well as various forms of insurance coverage.
  4. Financial Advisor

    Group Term Life Insurance: What You Need to Know

    Is group term life insurance really a good deal? What you need to know about employer-sponsored group term life insurance coverage.
  5. Retirement

    Top 3 Health Insurance Options if You Retire Early

    Early retirees will need to maintain coverage until they become Medicare-eligible at age 65.
  6. Insurance

    7 Mistakes to Avoid When Buying Health Insurance

    Understand the need for health insurance and why some undervalue the need for coverage. Learn about the top seven mistakes to avoid when purchasing insurance.
  7. Insurance

    SHOP Marketplace: How it Works for Employers

    SHOP is a health care insurance resource available for for-profit and nonprofit small business owners that has a straightforward sign-up process.
  8. Financial Advisor

    How to Help Clients Navigate Open Enrollment

    With companies trying to pass on more costs to employees, making the right choices during open enrollment is more important than ever.
  9. Managing Wealth

    Benefit Issues When Your Employer Goes Bankrupt

    There are some safeguards in place to ensure that health benefits don't just disappear when a plan is canceled.
  10. Insurance

    Take Advantage Of Employer-Sponsored LTC Insurance

    Find out why 98% of employees are missing out on some great benefits.
Trading Center