Quick and dirty overview of COBRA…
…prepared for one of our Congresspersons who doesn’t understand how it works…
Health Insurance Continuation Coverage Under COBRA
Most Americans with private group health insurance are covered through an employer, coveragethat is generally provided to active employees and their families, and may be extended to retirees.A change in an individual?s work or family status can result in loss of coverage. In 1985,Congress enacted legislation to provide temporary access to health insurance for qualifiedindividuals who lose coverage due to such changes. Under Title X of the Consolidated OmnibusBudget Reconciliation Act of 1985 (COBRA, P.L. 99-272), an employer with 20 or moreemployees must provide those employees and their families the option of continuing theircoverage under the employer?s group health insurance plan in the case of certain events. Thecoverage, usually for 18 months, can last up to 36 months, depending on the nature of thetriggering event. The employer is not required to pay for this coverage; instead, the beneficiarycan be required to pay up to 102% of the premium. Employers who fail to provide the continuedhealth insurance option are subject to penalties.In 1987, the Internal Revenue Service issued proposed regulations providing guidance foremployers on COBRA. The regulations were finalized in February 1999 and January 2001. Finalregulations regarding COBRA notification requirements were issued by the Department of Laborin May 2004.Some maintain that in requiring employers to provide former employees with the option ofcontinuing their health insurance coverage, COBRA has resulted in extra costs for employers (inthe form of increased premiums for employers? group health insurance policies), as well as addedadministrative burdens. Regardless of costs, others maintain that COBRA should be expanded toinclude new eligibility categories and longer coverage periods, so that more workers and theirfamilies have a source of group health insurance coverage during periods of job or familytransitions. They argue that the financial and administrative burdens on employers have beenexaggerated.This report provides background information on continuation health insurance under COBRA andon the COBRA population. It will be updated as events warrant.