COBRA Administration

Flexible Spending Links

Under COBRA, a group health plan ordinarily is defined as a plan that provides medical benefits for the employer's own employees and their dependents through insurance or otherwise (such as a trust, health maintenance organization, self-funded pay-as-you-go basis, reimbursement or combination of these). Medical benefits provided under the terms of the plan and available to COBRA beneficiaries may include:

Health
Dental
Vision

In 1986, Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA). The law amends the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise would be terminated.

COBRA contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available in specific instances. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer formerly paid a part of the premium. It is ordinarily less expensive, though, than individual health coverage.

The law generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments.{2} The law does not, however, apply to plans sponsored by the Federal government and certain church- related organizations.

Group health plans sponsored by private sector employers generally are welfare benefit plans governed by ERISA and subject to its requirements for reporting and disclosure, fiduciary standards and enforcement. ERISA neither establishes minimum standards or benefit eligibility for welfare plans nor mandates the type or level of benefits offered to plan participants. It does, though, require that these plans have rules outlining how workers become entitled to benefits.

ARRA Stimulus Premium Subsidy

The Health Insurance Assistance for the Unemployed Act of 2009 was enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA). This new law provides a federal subsidy of 65% of the COBRA premium payable for those beneficiaries who qualify.

In order to be certified as qualified for premium assistance, the employee must (a) have been involuntarily terminated from employment with the employer between September 1, 2008 and December 31, 2009, (b) have become eligible for COBRA or other state-law based continuation coverage as a result of that involuntary termination and (c) have not become eligible for other group health insurance coverage or Medicare since the original termination date.

Premium assistance is reduced for those who are eligible for assistance but whose Modified Adjusted Gross Income (MAGI) is above $125,000 per year ($250,000 for joint filers). Premium assistance is not available at all for those whose MAGI is $145,000 per year ($290,000 for joint filers).

COBRA Eligibility

The 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 qualifying events for spouses are:

Voluntary or involuntary 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 qualifying events for dependent children are the same as for the spouse with one addition:

Loss of dependent child status under the plan rules

A Member of Alliance Benefit Group