Employer-provided
health benefits
and coverage generally become obsolete once the
employment relationship ends. However, a federal law—Consolidated
Omnibus Budget Reconciliation Act of 1986 (COBRA)—has
certain provisions that enable an ex-employee to keep
health benefits coverage even after losing his/her job.
In the case of
terminated employment, COBRA requires
the employer maintaining the health insurance plan to
provide the ex-employee with an option to remain covered
by the employer’s plan for a specified period
of time.
COBRA is applicable to employers
with more than 20 employees (except churches, the
federal government, and the District of Columbia).
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Within 30 days of
firing an employee, the employer has to notify
the individual about his/her COBRA rights. This
must be done in writing. |
|
Under federal law, private employers
who employ more than 15 workers on a typical business
day must continue to provide group health insurance
coverage (for a specified time period) to an ex-employee
once the employment ends. |
|
Employers should notify the
employee regarding the rights available under
COBRA at the time of termination. |
Consolidated Omnibus Budget Reconciliation
Act (COBRA)
Congress passed the landmark Consolidated
Omnibus Budget Reconciliation Act (COBRA) health
benefit provisions in 1986. The law amends the Employee
Retirement Income Security Act (ERISA), the
Internal Revenue Code, and the Public Health Service
Act to provide continuation of group health coverage
that otherwise would be terminated.
COBRA contains provisions giving certain former employees,
retirees, spouses, and dependent children the right
to temporary continuation of health coverage at group
rates. This coverage, however, is only available in
specific instances. Group health coverage for COBRA
participants is usually more expensive than health
coverage for active employees, since usually the employer
formerly paid a part of the premium. It is ordinarily
less expensive, though, than individual health coverage.
The law generally covers group health plans maintained
by employers with 20 or more employees in the prior
year. It applies to plans in the private sector and
those sponsored by state and local governments. The
law does not, however, apply to plans sponsored by
the federal government and certain church-related
organizations.
Group health plans sponsored by private sector employers
generally are welfare benefit plans governed by ERISA
and subject to its requirements for reporting and
disclosure, fiduciary standards, and enforcement.
ERISA neither establishes minimum standards or benefit
eligibility for welfare plans, nor mandates the type
or level of benefits offered to plan participants.
It does, though, require that these plans have rules
outlining how workers become entitled to benefits.
Under COBRA, a group health plan ordinarily is defined
as a plan that provides medical benefits for the employer's
own employees and their dependents through insurance
or otherwise (such as a trust, health maintenance
organization, self-funded pay-as-you-go basis, reimbursement,
or a combination of these). Medical benefits provided
under the terms of the plan and available to COBRA
beneficiaries may include:
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Inpatient and outpatient
hospital care |
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Physician care |
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Surgery and other major medical
benefits |
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Prescription drugs |
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Any other medical benefits,
such as dental and vision care |
