COBRA and Your Business

First off, what is COBRA Insurance? The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows the continuation of group health insurance that would otherwise be terminated. It applies to group health plans maintained by: private-sector employers with 20 or more employees, employee organizations and state and local governments. COBRA allows the right to continue coverage temporarily at the group rates.

Eligibility of a Qualified Beneficiary

A qualified beneficiary is usually an employee, spouse or dependent child covered by a group health plan. They must be covered the day before a qualifying event. Other forms of qualified beneficiaries are retired employees (and their spouses and dependent children), and any child born to or placed for adoption with a covered employee during the period of COBRA coverage.

What is a Considered a Qualifying Event?

A qualified event is something that would cause an employee to loose health coverage. There are a number of qualifying events that trigger a qualifying event for a spouse or child of the dependent. The amount of time for the continuation of coverage depends on the qualifying event.

Employees:

• Voluntary of involuntary termination of employment (other than for gross misconduct) (18 months)
• Reduction in hours of employment (18 months)

 Spouse or Dependent Child:

• Voluntary of involuntary termination of the covered employee’s employment (other than for gross misconduct) (18 months)
• Reduction in hours of the covered employee’s employment (18 months)
• Covered employee’s becoming entitled to Medicare (36 months)
• Divorce or legal separation of the covered employee (36 months)
• Death of the covered employee (36 months)
• Loss of dependent child status under the plan rules (36 months)

Does Your Business Need to Offer COBRA?

Federal COBRA generally applies to employers that offer health coverage and employ 20 or more employees on 50% of its typical business days in the preceding calendar year. Both full-time and part-time employees count, but part-time employees only count as a fraction. The fraction is 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. The determination of the number of hours required to be considered a full-time employee (or to determine the fraction for part-time) is based upon the employer’s employment practices, but not to exceed eight hours for any day or 40 hours for any week.

Determining the Number of Employees

An employer may determine the number of their employees on a daily basis or a pay period basis.

The result of using either method could yield different eligibility, but figuring based on a pay period basis could save you time. Remember, you can stop counting once you have the same result for 50% of the preceding year’s business days or periods. However, the basis used by the employer must be used with respect to all employees and must be used for the entire year.

It is important for employers to review the previous year’s payroll and determine if they are subject to Federal COBRA, or alternately a state continuation plan when applicable. If your COBRA eligibility has changed, you will want to notify your COBRA administrator, insurance carrier, and insurance advisor.

There are many aspects of COBRA that an experience advisor can assist you with. Maintaining compliance is very important for your business. Contact us for further assistance!