Consolidated Omnibus Budget Reconciliation Act of 1985

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The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, is a law passed by the U.S. Congress and signed by President Reagan that mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving employment. COBRA includes amendments to the Employee Retirement Income Security Act of 1974 (ERISA).

Although this statute became law on April 7, 1986, its official name is the Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub.L. 99-272, 100 Stat. 82). Because of the discrepancy between the official name of the Act and the year in which it was enacted,^[1] some government publications refer to the Act as the Consolidated Omnibus Budget Reconciliation Act of 1986. The Act is often referred to simply as "COBRA".

1 Purpose
2 Notes
3 References
4 External links

[edit] Purpose

The Act allows employees of a qualifying employer and the employee's immediate family members who had been covered by a health care plan to maintain their coverage if a "qualifying event" causes them to lose coverage. A qualifying employer is generally an employer with 20 or more full time equivalent employees (ERISA cites"(more) than 20 employees on a typical business day during the preceding calendar year"). Among the "qualifying events" listed in the statute are loss of benefits coverage due to (1) the death of the covered employee, (2) termination or a reduction in hours (which can be the result of resignation, discharge, layoff, strike or lockout, medical leave or simply a slowdown in business operations) that causes the worker to lose eligibility for coverage, (3) divorce, which normally terminates the ex-spouse's eligibility for benefits, or (4) a dependent child reaching the age at which he or she is no longer covered. COBRA imposes different notice requirements on participants and beneficiaries, depending on the particular qualifying event that triggers COBRA rights. COBRA also allows for longer periods of extended coverage in some cases, such as disability or divorce, than others, such as termination of employment or a reduction in hours.

COBRA does not apply, on the other hand, if employees lose their benefits coverage because the employer has terminated the plan altogether.

COBRA does not, unlike other federal statutes such as the Family and Medical Leave Act (FMLA), require the employer to pay for the cost of providing continuation coverage; instead it allows employees and their dependents to maintain coverage at their own expense by paying the full cost of the premium the employer previously paid, plus up to a 2% administrative charge (150% for the disability extension). Employees and dependents can also opt for a lesser form of coverage, e.g., to choose continuation coverage under a plan that only covers the employee, but not his or her dependents, or that only provides medical and hospitalization coverage and does not pay for dental work, if those options are available to covered employees. Employees and dependents lose coverage if they fail to make timely payments of these premiums. Employers are required to inform employees and dependents upon loss of coverage, in writing, by at least fifteen days before the coverage ceases.

[edit] Notes

^ Discrepancies between the date in the official title of a U.S. budget Act and the date on which the Act was signed into law occur with some frequency. See, for example, the Deficit Reduction Act of 2005, signed into law in February of 2006.