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COBRA Rules and Regulations

COBRA Benefits and the Rules and Regulations

The COBRA law requires covered employers (20 or more employees) offering group health plans to provide employees and certain family members the opportunity to continue health coverage under the group health plan in a number of instances when coverage would otherwise have lapsed. The employee or qualified beneficiary may be charged 102 percent of the applicable premium for this benefit.

There are several different notice obligations under the law. First, a health plan administrator has an obligation under the law to provide a general notice of COBRA rights to an employee and his/her spouse when health coverage begins. All COBRA beneficiaries must be made aware of COBRA.

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.

Second, the employer of a covered employee must notify the plan administrator within 30 days when a qualifying event occurs.

COBRA events or COBRA Qualify Events include:

  • an employee's termination of employment;
  • reduction of hours in employment;
  • death;
  • enrollment in Medicare; or
  • the employer's bankruptcy filing

Third, the qualified beneficiary (employee or his/her spouse or dependent) must provide notice (within 60 days) to the plan administrator of a divorce, legal separation, child losing dependent status, second qualifying event, or Social Security disability determination. Fourth, the plan administrator in turn must notify (within 14 days) the qualified beneficiary (notice to spouse covers dependents residing with that spouse) of his/her COBRA rights.

Qualified beneficiaries have 60 days to elect continuation coverage. The maximum period that this continued coverage must be provided is generally 18 months, but in some cases it is 36 months. Under the Trade Act of 2002 there is a second 60-day election period for individuals who become eligible for trade adjustment assistance.

The employer must keep detailed records of COBRA notifications, including the dates sent, and detailed records of COBRA rejections or acceptance. Failure to comply with the law subjects the employer to excise taxes, in addition to damages under ERISA, as well as possible attorney’s fees and the liability for any of the beneficiary’s medical expenses that were due to the gap in coverage.