The Consolidated Omnibus Budget Reconciliation Act (commonly known as “COBRA”) requires an employer subject to COBRA to offer certain individuals the opportunity to continue group health coverage, at their own cost, when specific events occur. Employers are subject to COBRA if they employed 20 or more employees in the prior business year.
A COBRA election is required when there is an event listed in the COBRA statute that causes (or will cause) a loss of plan coverage. Only certain events give rise to a COBRA election, and therefore COBRA does not necessarily have to be offered every time an individual loses health coverage.
The following events require a COBRA election if the event causes a loss of coverage.
- Voluntary or involuntary termination of the covered employee’s employment for reasons other than gross misconduct;
- Divorce or legal separation of the covered employee from his or her spouse;
- Death of the covered employee;
- A dependent child ceasing to be a dependent under the terms of the health plan;
- A covered employee becoming entitled to benefits under Medicare;
- An employer’s bankruptcy (for retirees and their families).
An event must result in a loss of coverage to be a COBRA qualifying event. Some events, such as Medicare entitlement, do not cause a loss of coverage under a health plan so would not automatically require a COBRA election notice.
When an individual loses health coverage, an employer subject to COBRA should review the event causing the coverage loss to determine if a COBRA election must be offered.
