f. COBRA Rights


As originally enacted, Title X of the Act provided that a qualifying employer will not be permitted to take a tax deduction for its health insurance costs unless its health insurance plan allows employees of the employer and the employee's immediate family members who had been covered by a health care plan to maintain their coverage if a "qualifying event" causes them to lose coverage. However, the legislation was subsequently amended to instead impose an excise tax upon an employer whose health plan fails to satisfy the applicable rules. A qualifying employer is generally an employer with 20 or more full time equivalent employees.[2]

Among the "qualifying events" listed in the statute are loss of benefits coverage due to (1) the death of the covered employee; (2) an employee loses eligibility for coverage due to involuntary termination or a reduction in hours as a result of resignation, discharge (except for "gross misconduct"[3][4]), layoff, strike or lockout, medical leave, or slowdown in business operations; (3) divorce or legal separation that terminates the ex-spouse's eligibility for benefits; or (4) a dependent child reaching the age at which he or she is no longer covered. COBRA imposes different notice requirements on participants and beneficiaries, depending on the particular qualifying event that triggers COBRA rights.

COBRA also allows for coverage for up to 18 months in most cases. If the individual is deemed disabled by the Social Security Administration, coverage may continue for up to 29 months. In the case of divorce from the former employee, the former spouse's coverage may continue for up to 36 months. In the case of death of the former employee, the widow's coverage may continue for up to 36 months.

COBRA does not apply, on the other hand, if employees lose their benefits coverage because the employer has terminated the plan altogether or if the employer has gone out of business. In cases where COBRA does not apply, some states have stepped in with state health insurance continuation laws, usually called "mini-COBRA" laws, which help employees continue their health insurance when federal COBRA does not apply.[5]

COBRA does not, unlike other federal statutes such as the Family and Medical Leave Act (FMLA), require the employer to pay for the cost of providing continuation coverage. Instead it allows employees and their dependents to maintain coverage at their own expense by paying the full cost of the premium the employer and the employee previously paid, plus up to a 2% administrative charge (50% for the latter 11 months under the disability extension).

According to the U.S. Department of Labor:[6]