Consolidated Omnibus Budget Reconciliation Act (COBRA)

“COBRA” is the Consolidated Omnibus Budget Reconciliation Act of 1985. Federal COBRA generally requires group health plans sponsored by employers with 20 or more employees to offer qualified beneficiaries the opportunity to continue group health coverage after certain qualifying events cause a loss of coverage.

For private-sector employers, COBRA (ERISA) generally applies when the employer employed at least 20 employees on more than 50 percent of its typical business days during the preceding calendar year. State and local government health plans are generally subject to comparable continuation-coverage requirements under the Public Health Service Act. These PHSA provisions generally mirror private-sector COBRA continuation-coverage requirements. Centers for Medicare & Medicaid Services (CMS), rather than the U.S. Department of Labor, has primary federal oversight of these public-sector continuation requirements.

The Affordable Care Act did not eliminate COBRA continuation-coverage obligations. Individuals who lose job-based coverage may have the option to elect COBRA or enroll in Marketplace coverage or other coverage, depending on their circumstances.

Qualified beneficiaries
A qualified beneficiary generally includes:

• The covered employee.
• The covered employee’s spouse or former spouse.
• The covered employee’s dependent child who was covered under the plan on the day before the qualifying event.
• A child born to or placed for adoption with the covered employee during the COBRA continuation period, in certain circumstances.
• Each qualified beneficiary has an independent right to elect COBRA continuation coverage.

Qualifying events 
Common COBRA qualifying events include:

• Termination of the covered employee’s employment for any reason other than gross misconduct.
• Reduction in the covered employee’s work hours that causes loss of coverage.
• Death of the covered employee.
• Divorce or legal separation from the covered employee.
• The covered employee becoming entitled to Medicare, in circumstances affecting covered dependents.
• A dependent child losing dependent status under the health plan.
• Employer bankruptcy affecting certain retiree health plans.

Length of continuation coverage 
The continuation period depends on the qualifying event and other circumstances. For termination of employment or reduction in hours, COBRA continuation coverage generally lasts up to 18 months. For death of the covered employee, divorce or legal separation, a dependent child losing eligibility, or certain Medicare-related events, coverage generally may last up to 36 months for qualified dependents.

In some circumstances, the 18-month period may be extended. For example, a qualified beneficiary who is determined to be disabled by the Social Security Administration may qualify for an extension of up to 29 months. Other qualifying events that occur during an initial 18-month continuation period may allow certain dependents to receive up to 36 months of coverage.

Cost of COBRA coverage
COBRA continuation coverage is generally paid for by the qualified beneficiary. The plan may charge up to 102 percent of the applicable premium, which includes the full cost of coverage plus up to a 2% administrative fee. A city is not generally required to subsidize COBRA coverage.

Required notices and deadlines
Covered plans generally must provide an initial COBRA notice to covered employees and covered spouses within 90 days after coverage begins.

When a qualifying event occurs, the employer or plan administrator must provide an election notice explaining COBRA rights, coverage options, cost, election procedures, and applicable deadlines. For qualifying events such as termination of employment, reduction in hours, death, Medicare entitlement, or employer bankruptcy, the employer generally must notify the plan administrator within 30 days. The plan administrator generally must then provide the election notice within 14 days. If the city is also the plan administrator, the election notice generally must be provided within 44 days after the qualifying event.

For divorce, legal separation, or a dependent child’s loss of plan eligibility, the employee or qualified beneficiary may be responsible for notifying the plan within the period stated in the plan documents, subject to the applicable federal maximum notice period. A qualified beneficiary generally has at least 60 days to elect continuation coverage. The 60-day election period runs from the later of:

• The date coverage would otherwise end because of the qualifying event; or
• The date the election notice is provided.

Cities should:

• Identify whether the city or a third-party benefits administrator is responsible for COBRA notices and administration.
• Maintain a written process for promptly reporting qualifying events to the plan administrator.
• Provide timely and complete COBRA election notices.
• Keep records showing the date of the qualifying event, notice to the plan administrator, election notice, election deadline, premium due dates, and election results.
• Coordinate COBRA administration with FMLA, ADA accommodation, retirement, separation, payroll, workers’ compensation, disability benefits, and any city-paid health-coverage provisions.
• Ensure plan documents, employee handbooks, separation checklists, and benefit notices use current contact information and current notice forms.
• Consult the city attorney, benefits counsel, risk-management provider, or plan administrator regarding unusual situations, such as termination for alleged gross misconduct, divorce, Medicare entitlement, disability extensions, retiree coverage, or bankruptcy.