<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=690758617926394&amp;ev=PageView&amp;noscript=1">
The Complete Payroll Blog

Understanding how COBRA works

Posted by Complete Payroll | Oct 30, 2017 7:24:00 AM

Understanding how COBRA works.png

Losing their jobs can be a big financial hit for employees, but losing health benefits can be catastrophic. But the U.S. government has passed the Consolidated Omnibus Budget Reconciliation Act, commonly called COBRA, which gives some terminated workers the right to temporarily – for 18 months – continue participating in their former employer's group health plan.

However, just because your company picks up all or part of the cost for covered employees, it doesn’t have to continue paying its part for departed employees. They will have to carry the entire load of health insurance themselves, and you're allowed to add a 2 percent administrative fee.

New Call-to-action

What Are the Key Rules Under COBRA?

Your company comes under COBRA's provisions only if it has 20 or more employees. And each employee's qualifications under COBRA depends on his or her employment status, as explained below.

COBRA extends to former employees, retirees, spouses (current and former) and dependent children. These folks are eligible for COBRA only if the employee was terminated from his job or had his hours reduced for a reason other than gross misconduct. (There are some subtleties here, so check the guidance in the booklet noted below.)

If  any of your employees qualify for COBRA, they must receive the same health care benefits they received when they were gainfully employed. Whatever changes you, the employer, make to the plan apply to COBRA participants as well.

COBRA begins the day an employee otherwise would have lost health care coverage and usually lasts for 18 months. If an employee or a member of your family is disabled, coverage may be extended to 36 months. However, the Social Security Administration must agree that the employee is legitimately disabled and the premium costs are allowed to rise 150 percent for the extension.

An employee must make payments to COBRA within 45 days of the date he or she elected to participate and then at intervals set within the plan. If the account is more than 30 days past due, the plan can cancel coverage until the employee sends a check.

These are just the basics; there are a lot more details in our free guide, The Employer's Guide to COBRA.

New Call-to-action

Topics: Employees, Benefits

Written by Complete Payroll

We do payroll, HR, timekeeping and more for employers all over the country from a small, rural town in Upstate New York. And we're constantly publishing articles and other resources to help business owners, HR managers or anyone that helps manage a workforce. Welcome to Payroll Country!

Related Articles

Are you using our free resources?

We're constantly publishing free tools to help with payroll, HR and other administrative objectives.

Complete COVID-19 Resources for Employers
New Call-to-action

Subscribe to instant blog email notifications

Recent Posts

General Disclaimer

The materials and information available at this website and included in this blog are for informational purposes only, are not intended for the purpose of providing legal advice, and may not be relied upon as legal advice.  The employees of Complete Payroll are not licensed attorneys. This information and all of the information contained on this website are provided pursuant to and in compliance with federal and state statutes. It does not encompass other regulations that may exist, including, but not limited to, local ordinances. Complete Payroll makes no representations as to the accuracy, completeness, currentness, suitability, or validity of the information on this website and does not adopt any information contained on this website as its own. All information is provided on an as-is basis.  Please consult an attorney to obtain advice with respect to any particular question or issue.