COBRA (which stands for Consolidated Omnibus Budget Reconciliation Act of 1985) is often thought of as a health insurance plan for unemployed workers, but it’s actually an acronym for a set of regulations that requires employers to extend access to their existing group health insurance (as well as dental and vision insurance and medical travel benefits) to eligible individuals. By law, you must provide eligible employees, their spouses and dependent children with the identical group benefits they were enrolled in prior to the qualifying event that caused them to lose their group coverage. The exceptions are: life insurance, disability insurance, and LSAs. If only the former employee was enrolled in group benefits at the company, then you only need to extend benefit access to said employee (even if they have a spouse and dependent children at the time they separate from your company).
COBRA eligibility requirements
Federal regulations require employers who had 20 or more employees for at least 50% of their working business days the previous year to extend group health coverage to eligible employees via COBRA. If this doesn’t apply to your company, you might still be required to offer qualifying former employees COBRA benefits, depending on the state in which you operate. For example, California requires employers with 2-19 employees to offer COBRA insurance for up to 36 months to those that qualify. If the federal regulations don’t apply to your company, but you’re unsure about state requirements, reach out to your state’s department of insurance.
An employee is eligible for COBRA if they meet the following criteria:
- They worked full time.
- They worked part-time, but at least 30 hours per week.
- They’re retired.
- They voluntarily left the company.
- They were terminated for reasons other than gross misconduct.
- They were laid off temporarily or permanently and lost access to benefits.
- Their hours were reduced to the point they no longer qualified for benefits.
Additionally, the covered employee’s spouse or dependent children might qualify for COBRA benefits if they experience these qualifying events:
- Death of covered employee
- Divorce or legal separation from covered employee
- Covered employee qualifies for Medicare
- Dependent child ages out of coverage under parent’s group benefits
Employees that meet the following criteria are not eligible for continuing group benefits via COBRA:
- Employees who are ineligible for group plan coverage
- Employees who declined to participate in group coverage
- Employees who are enrolled for benefits under Medicare
- Employees who were terminated for gross misconduct
Lively's COBRA Guide
Help employees understand COBRA and how to continue with coverage even after exiting their jobs.
Read the guide.
COBRA requirements for employers
Understanding the Federal COBRA requirements for your employees is an important part of providing healthcare to your staff. Learn the requirements here!
Read more.
Lively COBRA and Direct Bill
Ever-changing rules and regulations often result in costly administrative headaches. Lively COBRA and Direct Bill make it easy for employers to keep transitions simple and compliant. Learn more.