Consolidated Omnibus Budget Reconciliation Act - COBRA

DEFINITION of 'Consolidated Omnibus Budget Reconciliation Act - COBRA'

A landmark federal law passed by Congress in 1986 that provides continuing coverage of group health benefits to employees and their families upon the occurrence of certain qualifying events where such coverage would otherwise be terminated. The qualifying events under which COBRA continuation health coverage can be extended include voluntary or involuntary job loss, reduction in hours worked, job transition, death, divorce and other life events. Group coverage under COBRA may be extended for a maximum of 18 months due to employment termination or reduction of hours worked, though coverage may be extended to 36 months under certain circumstances. COBRA covers health plans maintained by employers with more than 20 employees.

BREAKING DOWN 'Consolidated Omnibus Budget Reconciliation Act - COBRA'

COBRA continuing coverage is meant to provide an element of financial security to workers who would otherwise lose coverage because of a layoff, divorce or other event. COBRA participants may be required to pay the full premium for health coverage up to 102% of the plan cost. While COBRA coverage is therefore more expensive than coverage for active employees, for whom the employer generally pays a portion of the premiums, it is still more economical than individual health plans.