Should I Elect COBRA Coverage?

New York employees should understand the costs and benefits before deciding

COBRA can be a confusing law for the public. Its name bears little relation to what it regulates. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. But this federal law regulates employee health care coverage, essentially requiring that employees be given the opportunity to continue their health care coverage when they leave their job. Enacted in 1986, COBRA was meant to protect workers from doubly suffering a job loss and loss of health care for themselves and their dependents.

Who can elect COBRA coverage?

Group health plans for employers with 20 or more employees are subject to COBRA. Those that work for nonprofit churches or the government cannot elect federal COBRA coverage. However, New York state law requires coverage for these non-covered employees and their dependents.

An employee or their dependent covered by the group plan when a qualifying event occurs can elect COBRA coverage. A qualifying event under the law is an event that causes the employee to lose health care coverage. For an employee, a qualifying event will be either:

  • Voluntary or involuntary termination of employment for reasons other than gross misconduct
  • Reduction in the number of hours of employment

Spouses and dependents can also elect COBRA coverage for one of the qualifying events above, or under any of the following, additional qualifying events under the law:

  • Covered employee becoming eligible for Medicare
  • Divorce or legal separation from the covered employee
  • Death of the covered employee
  • Loss of dependent child status under the plan rules

Do I get the same coverage under COBRA?

Yes, employees and their dependents that elect for continuation under COBRA must be offered coverage identical to that of the other employees under the employer group plan. This is often the same plan the employee received prior to the qualifying event. If the employer group plan is changed, the COBRA coverage will change as well to the new plan. Those electing continuation of coverage under COBRA must also be give the same choices under the plan as the non-COBRA employees.

Although the type of coverage won’t change, the cost may increase. Many employers contribute toward their employee’s health plan cost. Under COBRA coverage, employers typically end those contributions, meaning employees and their dependents who elect for COBRA coverage will pay 100 percent of the cost of the health plan. The law allows employers to add another two percent on top of that cost for administrative expenses, meaning employees and their dependents with COBRA coverage may pay 102 percent of the cost of the health plan.

How do I elect COBRA coverage?

Employers are required to notify the group health plan administrator of any employee that experiences a qualifying event within 30 days of that event. That plan administrator then must provide notice of COBRA continuation coverage to the employee within 14 days. The employee must elect COBRA coverage within 60 days of the later of the employer’s notice or the employee’s last day of coverage.

However, spouses and dependents are required to provide notice of a qualifying event to the health plan in some situations. That notice must be given within 60 days of the event to the health plan in situations where the qualifying event is divorce, legal separation, or loss of child dependent status.

COBRA coverage lasts 18 months from the date of the qualifying event. In some circumstances involving a disabled employee, that employee may receive coverage up to 29 months under the law. However, coverage may be extended to 36 months for spouses and dependents of the covered employee in some situations, which include:

  • Death of covered employee
  • Divorce or legal separation from employee
  • Entitlement to Medicare for covered employee

Because of the high cost of COBRA coverage, anyone considering continuation of health care coverage under COBRA should also evaluate the costs of health care plans on the open market—the U.S. government’s insurance marketplace. Some individuals who purchase through the marketplace may also qualify for tax incentives.

For employers, employees, and dependents of employees with questions about COBRA coverage, they should reach out to an experienced New York health care attorney before making any decision, to first weigh the costs and benefits.

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