The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) generally requires group health plans sponsored by employers with 20 or more employees in the prior year to offer employees and their families the option to continue benefits for limited periods of time when coverage under the plan would otherwise end due to certain qualifying events. These events include voluntary or involuntary job loss, reduction in hours worked, death, divorce, and other life events.
COBRA sets rules for how and when continuation coverage must be offered, how employees and their families may elect COBRA, and what circumstances justify terminating coverage. The length of time for which continuation coverage must be made available depends on the type of qualifying event. For termination of employment or a reduction in hours, the maximum period of COBRA is generally 18 months. Up to 36 months of coverage may be available due to other qualifying events, or if a second qualifying event occurs during the initial period of COBRA coverage.
Please review our COBRA Steps to Success to understand the key areas involved in implementing COBRA for your company. Most states also have laws (commonly referred to as "mini-COBRA" laws) which require that group health plans provide COBRA-like continuation of benefits for certain employees and their families.
Texas requires employers to provide employees and dependents not eligible for federal COBRA the right to continue coverage for up to 9 months if coverage under the group policy is terminated (except under self-funded plans). Employers also must allow employees and dependents who are eligible for continuation coverage under federal COBRA to continue coverage for an additional 6 months under state law after federal COBRA is exhausted. Additionally, employers must continue coverage for certain dependents for up to 3 years if termination of coverage is caused by severance of the family relationship, or death or retirement of the employee.
Continuation coverage must be provided for up to 9 months for employees and eligible dependents not eligible for federal COBRA when coverage under the group policy is terminated for any reason other than involuntary termination for cause, including discontinuance of the group policy. To be eligible, the individual must have been continuously insured under the group policy for at least 3 consecutive months immediately prior to the termination.
Continuation coverage also must be provided for any employee or dependent eligible for coverage under federal COBRA for 6 additional months following any period of coverage under federal COBRA.
Spouses and dependents whose eligibility for coverage under the group policy ends due to the retirement or death of the employee or severance of the family relationship must be permitted to continue coverage for up to 36 months, provided that the individual has been insured under the group policy for at least 1 year (or is an infant under 1 year of age).
Notice Upon Termination of Coverage
Notice Upon Severance of the Family Relationship or Death or Retirement of Employee
Generally, the monthly premium for continuation of coverage is equal to the amount of contribution required plus 2% of the group rate. The first payment must be made no later than 45 days after the initial election for continuation coverage.
For spouses and dependents who continue coverage due to severance of the family relationship or the retirement or death of the employee, the premium may not exceed the group rate, except that a monthly administrative fee of not more than $5 may be required.
Continuation of benefits may be terminated before the end of the maximum period of coverage for any person eligible for continuation due to loss of group coverage for reasons other than involuntary termination, for the following reasons:
Employers may terminate the continuation of benefits for spouses and dependents due to severance of the family relationship or the retirement or death of the employee before the end of 36 months, for the following reasons:
Under the federal Patient Protection and Affordable Care Act (Health Care Reform), beginning with plan years starting on or after September 23, 2010, group health plans that offer dependent coverage must make the coverage available until a child reaches the age of 26. There is a temporary exception for grandfathered group health plans, which may exclude adult children who are eligible to enroll in an employer-sponsored health plan other than the group health plan of the parent. This exception will no longer be available for plan years beginning on or after January 1, 2014.
Individual states may have requirements that are more favorable to plan participants. For information about your state, please click here and contact your state insurance department for guidance.
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