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The COBRA Law

The Consolidated Omnibus Budget Reconciliation Act


In 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) which provides continuation of health insurance coverage that otherwise might be terminated after leaving employment. This law amends the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act to allow continuation of group health coverage.

Under COBRA, group health plans sponsored by employers that have at least 20 employees in the prior year must offer the option of continuing health coverage in certain instances.

COBRA requires group health plans to offer continuation coverage to covered employees, former employees, spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain events including the death of a covered employee, termination or reduction of hours of a covered employee’s employment for reasons other than gross misconduct, a covered employee becoming eligible for Medicare, divorce or legal separation of a covered employee and spouse, and a child’s loss of dependent status under the plan.

The law establishes three requirements to qualify for COBRA benefits:

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.*

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.* 

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.*

*Some information is gathered from the United States Department of Labor website.