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COBRA - Frequently Asked Questions

What is COBRA?

COBRA stands for The Consolidated Omnibus Budget Reconciliation Act and it gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.

Indiana law requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end. Group health plans sponsored by employers in Indiana with less than 20 employees are exempt from COBRA regulations, but are required to offer employees and their families continuation of coverage through Indiana State Continuation laws for small employers.

COBRA outlines how employees and family members may elect continuation coverage. It also requires employers and plans to provide notice.

What does COBRA do?

COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events.  Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.

Who is entitled to benefits under COBRA?

There are three elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:

1. Plan Coverage - Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full time.

2. Qualified Beneficiaries - A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee's spouse, or an employee's dependent child.  In certain cases, a retired employee, the retired employee's spouse, and the retired employee's dependent children may be qualified beneficiaries.  In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary.  Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.

3. Qualifying Events - Qualifying events are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.

Qualifying Events for Employees:

Qualifying Events for Spouses:

Qualifying Events for Dependent Children:

How does a person become eligible for COBRA continuation coverage?

To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan when you worked and the health plan must continue to be in effect for active employees. COBRA continuation coverage is available upon the occurrence of a qualifying event that would, except for the COBRA continuation coverage, cause an individual to lose his or her health care coverage.

What process must individuals follow to elect COBRA continuation coverage?

Employers must notify plan administrators of a qualifying event within 30 days after an employee's death, termination, reduced hours of employment or entitlement to Medicare.

A qualified beneficiary must notify the plan administrator of a qualifying event within 60 days after divorce or legal separation or a child's ceasing to be covered as a dependent under plan rules.

Plan participants and beneficiaries generally must be sent an election notice not later than 14 days after the plan administrator receives notice that a qualifying event has occurred.  The individual then has 60 days to decide whether to elect COBRA continuation coverage. The person has 45 days after electing coverage to pay the initial premium.

Can I receive COBRA benefits while on FMLA leave?

The Family and Medical Leave Act, effective August 5, 1993, requires an employer to maintain coverage under any group health plan for an employee on FMLA leave under the same conditions coverage would have been provided if the employee had continued working. Coverage provided under the FMLA is not COBRA coverage, and FMLA leave is not a qualifying event under COBRA. A COBRA qualifying event may occur, however, when an employer's obligation to maintain health benefits under FMLA ceases, such as when an employee notifies an employer of his or her intent not to return to work.

I have heard about the new COBRA extension and subsidy that was contained in the Stimulus package signed by the President. I would like more information.

The American Recovery and Reinvestment Act of 2009 expanded eligibility for COBRA and provides a premium reduction to certain qualified individuals. Individuals eligible for COBRA coverage who were involuntarily terminated by their employer on or after September 1, 2008 through December 31, 2009 who are eligible for COBRA and elect COBRA may be eligible to pay a reduced premium amount that is only 35% of the premium costs for your COBRA coverage. If you were terminated during that period and were covered by your employer's plan on your last day of employment, your plan administrator should provide you a notice of your eligibility to elect COBRA and to receive a premium reduction. You may also want to contact your employer directly to ask about getting the premium reduction.

If you have specific questions about your situation and how these new rules apply to you, you may wish to speak with a Department of Labor Benefits Advisor by calling 1.866.444.3272. You should also check the Employee Benefits Security Administration’s dedicated Web page at www.dol.gov/COBRA. This Web page will contain helpful information and will be updated regularly to include FAQs and new information related to the process you should follow to apply for COBRA and/or the premium reduction.

How can I apply for the COBRA premium subsidy?

Individuals eligible for COBRA coverage who were involuntarily terminated by their employer on or after September 1, 2008 through December 31, 2009 who are eligible for COBRA and elect COBRA may be eligible to pay a reduced premium amount that is only 35% of the premium costs for your COBRA coverage. If you were terminated during that period and were covered by your employer’s plan on your last day of employment, your plan administrator should provide you a notice of your eligibility to elect COBRA and to receive a premium reduction. You may also want to contact your employer directly to ask about getting the premium reduction.

You should also check the Employee Benefits Security Administration's dedicated Web page at www.dol.gov/COBRA. This Web page will contain helpful information and will be updated regularly to include FAQs and new information related to the process you should follow to apply for COBRA and/or the premium reduction.

I’ve been enrolled in COBRA and paying premiums prior to the enactment of the American Recovery and Reinvestment Act of 2009. Can I get a refund of 65% of the premiums I have paid prior to the law’s enactment?

The premium reduction provisions relate only to premiums for coverage periods beginning after the new law was enacted on February 17, 2009. The law does not allow reimbursement of premiums for coverage periods beginning before February 17, 2009. Qualified individuals can, however, receive the premium subsidy going forward, for up to nine months.

Your plan administrator should provide to you a notice of your right to apply for the premium reduction. You may also want to contact your employer directly to ask about getting the premium reduction and how to reconcile any amounts you might have overpaid after February 17, 2009.