COBRA compliance

What is COBRA compliance?

The Consolidated Omnibus Budget Reconciliation Act, or COBRA, is a US federal law that requires organizations to offer company-sponsored health insurance coverage to employees after a set of qualifying events—such as job loss, reduced working hours, divorce, and death—for a limited period of time. These benefits extend not just to employees but also to their dependents, including their spouses, parents, and children. This way, employees have access to health insurance even after their plan eligibility or employment ends.

What are qualifying events in COBRA coverage?

In COBRA coverage, qualifying events refer to different situations that force an employee to lose their access to company-sponsored health insurance coverage. Under COBRA, employees and their dependents have access to coverage for a limited time after:

Termination
Resignation
Reduced working hours
Death of the covered employee
Divorce or legal separation from the covered employee
Loss of dependent status (for example, when the dependent turns 26)

Which businesses are required to offer COBRA coverage?

Organizations that have more than 20 employees on more than 50% of their business days during their previous calendar year are required to offer continued coverage to employees and their dependents under COBRA. State and local government organizations are also required to offer coverage similar to COBRA under certain laws. However, COBRA doesn't extend to federal government plans or church-related organizations. Federal employees are instead covered by the Federal Employees Health Benefits Program. Small businesses that have fewer than 20 employees are exempt from providing COBRA coverage unless there are state-specific "mini-COBRA" laws that apply to them.

What are mini-COBRA laws?

Mini-COBRA laws are state-specific and apply to small organizations with fewer than 20 employees that aren't covered by the federal COBRA law. The specific mandates, such as coverage duration, eligibility, and premium requirements, vary from state to state. Many states, including Arizona, Florida, Kansas, and Illinois, have their own mini-COBRA laws.

Which employees qualify for COBRA?

All employees who are covered under qualifying organizations' health insurance programs are eligible for COBRA. They should experience a qualifying event that results in the loss of their health insurance coverage to access coverage.

How do COBRA premiums work?

Under COBRA, when employees face a qualifying event and choose to continue their health insurance coverage, they typically have to pay the full premium cost, including both their own portion and the portion their employer contributed before the event. They may also be charged up to 2% extra to help their employers cover administrative charges.

How long does COBRA coverage last?

Depending on the qualifying event, COBRA coverage can last for 18, 29, or 36 months. Employees who lose their coverage due to termination or reduction of working hours are eligible for continued coverage for up to 18 months under the law. Spouses and dependents who lose their coverage due to events such as divorce or the death of the covered employee receive coverage up to 36 months. When a disability of the covered employee is determined within 60 days of COBRA coverage, their continuation period under the law may be extended up to 29 months.

What are the consequences of non-compliance with COBRA?

Non-compliance with COBRA can bring serious financial consequences to organizations. The IRS can impose an excise tax of $100 per day per employee or $200 per family. Employees have the right to impose civil lawsuits in case of non-compliance with COBRA.