COBRA Continuation Insurance: Employer Responsibilities

COBRA continuation insurance provides employees with temporary health insurance after leaving a job if they meet the requirements.

What Is COBRA?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a temporary health plan provided by the employer in the event that an employee's work hours are reduced or an employee suffers the loss of her job. The employer is required to offer this if the employee was covered under a group health plan.

An employer is required to comply with COBRA regulations if it has twenty or more employees or if it has fewer than twenty employees but obtains group health insurance from an association in which at least one member has more than twenty employees. Failure to comply with these COBRA regulations can result in severe tax penalties. It is a good idea for an employer to discuss this applicability with an attorney in an effort to avoid violating these regulations.

By law, the employer must notify its employees of their right to elect COBRA continuation coverage if they were covered under the company’s group health plan. This includes coverage for all dependents that were covered under the plan as well.

A qualifying event must take place for COBRA to be considered an option:

  • Job termination, except in cases of gross misconduct
  • Reduction of work hours that reduce the number of hours required for plan eligibility
  • Divorce or dissolution of marriage,  which would terminate a spouse’s coverage
  • Entitlement to Medicare, which could terminate coverage for dependents
  • A child who becomes no longer eligible as a dependent
  • Death, which would terminate coverage for a spouse and/or dependents

What Are the Employer Responsibilities?

Notification of COBRA continuation insurance should be provided to all employees and their dependents, and when there is a qualifying event, a “Continuation of Coverage Notice” should be mailed to the employee within 90 days. Failure to notify carriers or providers can be a liability easily avoided and must be done within three months or 90 days from the date the employee’s coverage terminates. Instructions for completing the “insurance termination or continuation request COBRA election” form should be sent to the employee.

An employer should also maintain records that show it to be in compliance with COBRA law. The employer should keep records of providing new employees with information about COBRA. Evidence of this could be included in the employee orientation attendance record. There should also be records of having sent the “Continuation of Coverage Notice” to employees when a qualifying event occurs within the company. A copy of the notice should be included in the personnel file of any employee who has experienced a qualifying event.