9.1.1 Consolidated Omnibus Budget Reconciliation Act (COBRA)

Louisiana Statewide Transition Project and Louisiana: Healthy and Ready to Work Fact Sheet Series

 

6/25/99

I. WHY IS THIS IMPORTANT?

Many young adults and their families wonder what will happen to private health insurance coverage if the person holding the policy changes or loses his/her job? Provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA) allow most employees (or covered dependents) the right to continue their group health care coverage at their own expense. When faced with changing private insurance coverage, it is important to know about COBRA and how it may affect the family.

 

II. KEY POINTS

COBRA contains provisions giving certain former employees, retirees, their spouses, and their dependent children the right to temporary continuation of health coverage at group rates. 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, as well as 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 (CIC, 1994).

In 1985, Congress passed COBRA, which allows employees (or their covered dependents) who have experienced a "qualifying event" the right to continue their group health care coverage for up to 36 months. Qualifying events include:

·        termination of employment (for reasons other than "gross misconduct");

·        reduction in work hours (which makes the employee ineligible for benefits);

Once a young adult becomes too old to continue as a "dependent" under the policyholder's plan, it is the responsibility of the young adult or parent to notify the COBRA administrator of their ineligibility within sixty (60) days. If the administrator is not notified within this time frame, continuation of coverage does not have to be offered. Employers have the right to charge the COBRA participant 102% of their group premium costs for continued coverage. The additional two (2%) percent is to cover administration costs.

When the policyholder or one of his/her covered dependents has a disability, the timelines for COBRA change a little. If the policyholder (or any of his/her covered dependents) has a disability at the time of the "qualifying event" or acquires one within the first sixty (60) days of COBRA, they must be offered an eleven (11) month extension. In order to qualify for this extension, continuation the policyholder must provide written documentation from the Social Security Administration within eighteen (18) months. During this eleven (11) month extension, the employer may charge up to a fifty (50%) percent administration fee and must allow all individuals on the plan to continue (CIS, 1999).

 

III. ROLES/NEXT STEPS

Students/Young Adults:

Young adults should know what options are available to them regarding continued health insurance coverage. If they are currently covered under a parent's plan, they should find out how long they will be able to remain covered by this plan. These and other health insurance issues should be discussed when planning for the transition to adulthood.

Young adults should be careful about changing policies. A new policy may have waiting periods and pre-existing condition exclusions that could leave them without coverage. If a change in policy is necessary, young adults should know about COBRA and how it may impact their coverage.

Families:

Families should find out how long their son/daughter may continue to be covered under their insurance policy. They should investigate how laws such as the Consolidated Omnibus Budget Reconciliation Act (COBRA) may impact them.

Families should help their son/daughter investigate the options available for health insurance. By discussing the pros and cons of each option, families can help young adults make informed choices. Families should be sure to discuss issues relating to health insurance at meetings during which the transition to adulthood is discussed.

Agencies:

Local Education Agencies (LEAs) can help young adults learn about various forms of health insurance in general, and COBRA in particular, by including this topic in courses such as Consumer Science or Consumer Economics (formerly Home Economics).

It may be helpful to invite the family's insurance representative to the Individualized Education Program (IEP) meeting at which the transition to adulthood is discussed. By providing information on what coverage is available to the young adult through the family's existing plan, as well as other available options, the representative can help young adults plan for their insurance needs.

 

 

IV. RESOURCES/CONTACTS

Pension & Welfare Benefits Administration

U.S. Department of Labor

200 Constitution Avenue N.W.

Room N-5625

Washington, D.C. 02010

Telephone (202) 219-8776

(To order publications) 1-800-998-7542

Customer Service 816-426-5131

Website: http://www.hcfa.gov

V. REFERENCES

Consumer Information Center (CIC) (1994). Health Benefits Under (COBRA) - The Consolidated Omnibus Budget Reconciliation Act. Pueblo, CO: Consumer Information Center. [available via Internet at http://www.pueblo.gsa.gov/cic_text/employ/cobra/cobra.txt]

COBRA Solutions, Inc. (CSI) (1999). The COBRA Legislation. Tempe, AZ: COBRA Solutions, Inc. [available via Internet at http://www.cobra-solutions.com/regulations/cobra_hi.htm]