On April 7, 1986, The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) was enacted (also known as Public Law 99-22, Title X) requiring employers with 20 or more employees to offer certain employees and their families the opportunity to elect a temporary extension of health coverage at group rates where coverage under the plan would otherwise end.
Qualified employees are entitled to continuation of benefits without evidence of good health. This coverage must provide continuous coverage identical to other similarly covered individuals who have not lost coverage. If a plan has dental, vision or other health benefits, these benefits are subject to continuation coverage. Continuation coverage does not include short-term or long-term disability and life insurance benefits. If the individual does not elect continuation coverage, coverage will end.
An employer must comply with COBRA if it offers health benefits to its employees and there are 20 (plus) employees on at least 50% of the "typical business days" during the preceding calendar year. Employers who are a Controlled Group of Corporations are aggregated and treated as a single employer when making this determination.
Six events that, if they result in a loss of coverage, can be "Qualifying Events":
- death of the covered employee
- voluntary or involuntary termination of the covered employee's employment (side note: retirement is considered a termination of employment)
- decrease in hours of the covered employee's employment
- divorce/legal separation of the covered employee from the employee's spouse
- dependent child ceasing to be a dependent child under the generally applicable requirements of the plan an employer's bankruptcy, but only with respect to health coverage for retirees and their families
When the qualified beneficiary is an employee and the covered spouse and dependents lose coverage due to the employee's termination of employment or reduction in hours, the employee, covered spouse and dependents may continue coverage up to 18 months.
The 18-month continuation period may be extended to a maximum of 36 months if a second qualifying event occurs during the 18-month continuation period. The extension does not entitle the qualified beneficiary to more than 36 months of coverage.
A qualified beneficiary who is determined by the Social Security Administration to have been disabled within the first 60 days of COBRA coverage is eligible for the disability extension.
- The extension may be granted provided a determination letter issued by the Social Security Administration is sent to Discovery Benefits within 60 days of receipt within the 18 month coverage period.
- The disability extension is available to all individuals who are qualified beneficiaries due to a termination or reduction in hours.
- To be eligible for the 11 month extension, affected individuals must comply with the notice requirements in a timely fashion. Premiums during the additional 11 months of coverage would be at a substantially higher rate.
When the qualified beneficiary is a covered spouse or dependent child who loses coverage due to divorce or legal separation, death of the employee, the employee becomes covered by Medicare or the loss of dependent child status under the plan, coverage in force on the day prior to the qualifying event can continue for up to 36 months.