COBRA Health Insurance Coverage Continuation Law

On Feb. 17, President Barack Obama signed the economic stimulus package into law, which includes a provision that would subsidize employees' COBRA payments to continue their health insurance coverage.

Free HR Hero White Paper: What the Obama Stimulus Plan means for Employers: COBRA, Benefits, and More

Under it, the government would pay 65% of workers' COBRA premiums for up to 9 months. Eligible employees include anyone who has lost or loses a job between September 1, 2008 and Dec. 31, 2009. To qualify for the subsidy, people must certify that their income is no more than $125,000 for individuals and $250,000 for families. Employees who have already been laid off but chose not to sign up for COBRA coverage have 60 days to do so.

Audio Conference: Effective Immediately: How the Stimulus Package Changes COBRA

The Internal Revenue Service has set up its own Web page, with information for employers on administering the COBRA subsidy and obtaining credits against payroll taxes. Employers should use the updated Form 941, Employer¹s Quarterly Federal Tax Return, to report their COBRA premium assistance payments. The form and instructions are available on the Web page, along with a link to a Q & A page.

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COBRA tools for Employment Law Letter subscribers

Of all the federal laws governing the workplace, COBRA (Consolidated Omnibus Budget Reconciliation Act) is at the top of the list in terms of complexity and confusion. It sounds like such a simple law, and its intent was certainly noble. COBRA is basically a safety net for employees and their families to keep their health insurance, at their own expense, when they’re in between jobs or other life major events happen – like getting separated or divorced.

Generally, COBRA health insurance coverage can last up to 36 months depending on the circumstances. Employers with at least 20 employees are covered by COBRA law. Some states have similar laws that apply to smaller employers or require longer periods of continuation coverage.

State-by-state comparison of health insurance continuation laws

But what started out as a seemingly simple premise has evolved into a monolithic jumble of statutes, regulations, and regulatory documents. Not to mention the morass of case law interpreting what the law and regulations say and require. One word of caution: It’s impossible to answer every question that may arise about COBRA compliance in a few paragraphs or even pages. For many questions about COBRA, consulting a competent benefits attorney is the only way to be completely sure of compliance.

COBRA notification
COBRA requires employers to comply with several notice requirements to inform employees and their dependents of their rights to continued health coverage under COBRA. Separate notices must be given to employees (and their spouses) when they first start participating in your plan and to employees and dependents after they experience an event that would cause them to lose coverage under your plan.

Audit your COBRA policies and practices with the Employment Practices Self-Audit Workbook

COBRA enforcement
The U.S. Department of Labor (DOL) is responsible for interpreting and administering the COBRA provisions that appear in the Employee Retirement Income Security Act (ERISA), while the Internal Revenue Service (IRS) is responsible for interpreting and enforcing the provisions that appear in the Internal Revenue Code. The two agencies share responsibility for enforcing COBRA.

COBRA qualifying events
Qualifying events that can trigger COBRA rights include the following:

• termination of employment (including firing for a reason other than gross misconduct, retiring, or quitting);
• reduction in hours so that the employee is no longer qualified for the health plan;
• major life events (An employee’s spouse and dependent children may be entitled to COBRA coverage when the employee dies, the employee becomes entitled to Medicare, or the employee and spouse get divorced or legally separated.); and
• layoff.

Military leave and health insurance coverage continuation
Going on military leave can be a qualifying event because of a reduction in hours. Employees on military leave also are protected by the Uniformed Services Employment and Reeemployment Rights Act (USERRA), which allows them to continue health care coverage, at their expense, for themselves and covered dependents for up to 24 months.

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Related articles on COBRA Health Insurance Coverage Continuation Law featured in HR Hero Line, HR Hero White Papers, and Employment Law Post

• IRS issues new COBRA guidance for employers
  (Human Resources News, April 2009)
• What the Obama stimulus plan means for employers: COBRA, benefits, and more
  (HR Hero White Papers , March 2009)
• More details on COBRA continuation subsidy in stimulus package
  (Human Resources News, February 2009)
• What Obama's economic stimulus plan means for employee benefits plans
  (Benefits and Compensation Law Alert , February 2009)

HR Tools for COBRA)

• Sample Policy - Continuation of Health Care Plan Coverage
• Sample Policy - Health and Welfare Benefits
• Forms - COBRA