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Summary: Offering continuing benefits for your employees whose employment status changes can help them manage a challenging time. COBRA is one way to offer this— learn who qualifies, what you need to provide to employees and how to help them understand their options.
COBRA 101: Helping Employees Stay Covered through Tough Times
Over the course of this year, many employers have had to reevaluate their staffing needs due to the challenges, changes and unforeseeable future of COVID-19. In some cases, this has meant layoffs, reductions in hours and furloughs. Many of these affected employees are eligible for COBRA coverage. What does that mean for them and for you as an employer?
What is COBRA?
COBRA is the Consolidated Omnibus Budget Reconciliation Act of 1986. It allows workers who lose their health benefits to choose to continue their group coverage, as long as COBRA covers the plan. This extension of their health benefits is for a set period of time. Employees who lose coverage under certain qualifying events might qualify for COBRA. These include:
- voluntary or involuntary job loss,
- reduction in the hours worked,
- transition between jobs,
- or other life events.
COBRA typically applies to businesses with 20 or more employees with health coverage the prior year. It requires that an employer-sponsored health plan offer continuation coverage for eligible employees. This temporary extension is for the employees with current coverage. Some states have laws like COBRA, which might even extend to groups smaller than 20 employees.
It can be helpful for members to remain on the same health plan during a time of transition or hardship. But COBRA coverage can be very expensive for employees. You may choose to pay part of the coverage to further help your former employees, or the employee can be responsible for the entire cost of the premium (up to 102%). This means the employee would have to cover the full cost of their plan. They might find a different plan that better fits their needs and their budget. Because they are losing job-based coverage, they are able to enroll in another plan outside the usual Annual Enrollment Period.
It is important to note the extended coverage plan must be identical to what other employees receive. To be eligible for COBRA benefits, an employee and any covered dependents must have been enrolled in the health plan before the qualifying event took place.
What does an employer need to know?
A critical element of COBRA is providing information to your employees. You must provide employees specific notices about their COBRA rights. These rights should be outlined in the plan’s Summary Plan Description and given to employees within 90 days of enrollment. Within that same 90-day period, each employee who becomes covered by the plan should receive a general notice outlining COBRA.
The election period is another important step of offering COBRA. If an employee receives the option of continuing their coverage, they have at least 60 days as an election period. This can be a big decision for an employee and their family. Allowing time to research other options can help them feel more confident about their choice.
An employee can opt to drop their coverage at any time. They can also lose coverage in several instances, including:
- if they don’t pay their premiums on time,
- if you stop offering a group health plan, or
- if the employee has coverage from another group plan.
If you end coverage early, you must provide the employee an early termination notice.
COBRA coverage can help employees during times of hardship. It can be reassuring to know they will have a health plan when they need it most. The important thing is to consider the different options and discuss them with your employees. You can learn more about COBRA coverage at www.dol.gov or www.healthcare.gov.