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COBRA & Cal-COBRA
The federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) protects the rights of individuals who would otherwise lose group health coverage.
COBRA requires employers with 20 or more employees to provide the opportunity for covered employees and their eligible dependents to continue health plan coverage (medical, dental, vision) at group rates (plus an administrative percentage) after certain qualifying events.
A similar California state law, Cal-COBRA, applies to employers with 2-19 employees.
Shargel & Co. does not provide legal advice. This information is provided for general purposes.
qualifying events
COBRA & Cal-COBRA qualifying events include loss of group coverage due to:
- termination of employment
- reduction in work hours
- divorce or separation from covered spouse
- death of covered employee
- loss of domestic partner status (Cal-COBRA only)
- loss of dependent child status
COBRA or Cal-COBRA determination
Groups with 20+ employees during at least half of the previous calendar year are subject to federal COBRA law.
The 20-person count includes full-time employees plus each part-time employee counted as a fraction of hours worked per full-time workday or pay period. (For example, a part-time employee working 30 hours a week where full-time is 40 hours counts as 0.75 employees.)
Groups with 2-19 employees are subject to Cal-COBRA.
Cal-COBRA employer responsibilities
For Cal-COBRA, the employer must notify the health plan of the employee's loss of group health care coverage eligibility within 30 days of termination of employment or reduction in hours. Each carrier has their own paperwork requirements.
Cal-COBRA health plan responsibilities
For employers under Cal-COBRA, the health plan acts as the administrator. The health plan notifies the subscriber of the availability of Cal-COBRA and handles the administration.
federal COBRA employer responsibilities
For federal COBRA, the employer is responsible for notifying the employee of eligibility for COBRA and subsequent Cal-COBRA, if applicable, among other responsibilities.
using a third party administrator
We recommend using a third party administrator for COBRA. Most insurers have a reputable company that they recommend. CobraServ and Ceridian are examples.
employee responsibilities
When losing their own coverage, employees have 60 days to accept COBRA or Cal-COBRA after they receive notice of eligibility and premiums. Download our newsletter for individuals losing coverage.
Employees are responsible for notifying you and the health plan of changes in spouse and dependent child status, usually within 60 days. See your plan administrator guide for details.
HIPAA guaranteed issue coverage
When an individual exhausts COBRA and/or Cal-COBRA benefits he or she is guaranteed coverage under the Health Insurance Portability and Accessibility Act (HIPAA). He or she may also choose to apply for a medically underwritten plan in the individual market.
2009 ARRA continuation coverage subsidy
The American Economic Recovery and Reinvestment Act (ARRA) of 2009 went into effect on February 17, 2009. It has a significant impact on COBRA and Cal-COBRA continuation coverage for health plans.
This legislation, also known as the economic stimulus bill or package includes provisions for a federal subsidy of 65% for medical continuation coverage premiums for workers who are involuntarily terminated from their jobs on or after September 1, 2008 through December 31, 2009, and their qualified dependents (i.e. those enrolled in the group plan at the time of termination). The subsidy is provided for up to 9 months as long as the individual receiving the subsidy is not eligible for another group plan, including a spouse's plan.
The subsidy is provided in the form of a payroll tax credit to the employer, health plan or administrator. See your payroll and COBRA or Cal-COBRA administrator for assistance with the credit.
There are many rules associated with the subsidy, including additional IRS reporting requirements and required employee notices. If you are a client, please contact us or your COBRA administrator for specific information.
We are posting insurance carrier information on our website as it becomes available. Visit your specific carrier's links for current documents.
This Act does not affect the underlying COBRA rules and does not affect workers and dependents who lose coverage due to a reason other than involuntary termination during the relevant time period.
You can find official information on the COBRA subsidy on the US Department of Labor website. You can find official tax related information on the IRS website.
Appealing an employer's ARRA subsidy denial
Employers have to verify that an ARRA subsidy claim is valid. If you have applied for the subsidy and was declined by your employer, you can appeal the decision.
Oftentimes, employers misunderstand the definition of involuntary termination.
If you believe you meet the eligibility criteria and have been denied a federal COBRA subsidy, you can file an appeal on the US Department of Labor website at www.dol.gov/ebsa/COBRA/main.html or call 866.444.3272.
If you believe you meet the eligibility criteria and have been denied a state Cal-COBRA subsidy, you can file an appeal with the US Department of Health and Human Services website using the form at www.continuationcoverage.net, or call 866.400.6689.