Comprehensive Omnibus Budget Reconciliation Act of 1985 (COBRA) USA

The Comprehensive Omnibus Budget Reconciliation Act of 1985 (COBRA) is a federal law in the United States that gives certain employees and their dependents the right to continue their employer-sponsored health insurance coverage for a limited period of time after certain “qualifying events.” These qualifying events include the employee’s termination of employment, reduction in the number of hours worked, or death, divorce or legal separation. The law applies to employers with 20 or more employees, and to most group health plans, including those provided by state and local governments.

Under COBRA, employees and their dependents have the option to continue their existing health coverage for a period of 18 to 36 months, depending on the type of qualifying event. The employee is responsible for paying the full premium, including the portion of the premium that was previously paid by the employer. COBRA also requires employers to provide notice of the COBRA rights to employees and their dependents.

COBRA is intended to protect employees and their dependents from losing their health coverage during a time of transition, such as a job loss or change in family status. It gives employees the opportunity to maintain their health insurance coverage while they look for new employment or arrange alternative coverage.

Comprehensive Omnibus Budget Reconciliation Act of 1985 History and Amendment

The Comprehensive Omnibus Budget Reconciliation Act of 1985 (COBRA) was enacted as part of a larger budget reconciliation package passed by Congress in 1985. It was intended to address concerns about the high cost of health care and the potential for workers to lose their health insurance coverage due to a change in employment status.

The law was amended in 1986, to include state and local government plans and expanded the qualifying events to include disability and the end of a dependent child’s eligibility under the plan.

In 2010, the Patient Protection and Affordable Care Act (ACA) was passed and made several changes to COBRA, including:

• An extension of COBRA coverage from 18 to 36 months for employees and their dependents who experience a “second qualifying event” such as the loss of coverage due to divorce or legal separation.
• A subsidy for COBRA coverage for certain individuals who are involuntarily terminated from their employment between September 1, 2008 and May 31, 2010.

In 2021, COBRA subsidy was provided as a part of American Rescue Plan Act (ARPA), which gave a 100% premium subsidy for COBRA continuation coverage to eligible individuals who are involuntarily terminated from their employment or have a reduction in hours between April 1, 2021 to September 30, 2021.

Comprehensive Omnibus Budget Reconciliation Act of 1985 Provisions

The Comprehensive Omnibus Budget Reconciliation Act of 1985 (COBRA) includes several provisions that protect employees and their dependents from losing their employer-sponsored health insurance coverage when certain qualifying events occur. Some of the key provisions include:

• Continuation of coverage: Under COBRA, employees and their dependents have the option to continue their existing health coverage for a period of 18 to 36 months, depending on the type of qualifying event.
• Premiums: Employees and their dependents are responsible for paying the full premium for their COBRA coverage, including the portion of the premium that was previously paid by the employer.
• Notice requirements: Employers are required to provide notice of the COBRA rights to employees and their dependents when a qualifying event occurs.
• Qualifying events: COBRA applies to certain qualifying events, such as the employee’s termination of employment, reduction in the number of hours worked, death, divorce or legal separation, and certain dependent children losing coverage.
• Second Qualifying event: Extension of COBRA coverage from 18 to 36 months for employees and their dependents who experience a “second qualifying event” such as the loss of coverage due to divorce or legal separation.
• Subsidy: COBRA subsidy was provided as a part of American Rescue Plan Act (ARPA) for certain individuals who are involuntarily terminated from their employment between April 1, 2021 to September 30, 2021.
• Limitations: COBRA does not apply to self-insured plans or plans established by churches.

Comprehensive Omnibus Budget Reconciliation Act of 1985 Responsibilities and Accountabilities

The Comprehensive Omnibus Budget Reconciliation Act of 1985 (COBRA) places certain responsibilities and accountabilities on employers and plan administrators in order to ensure that employees and their dependents are able to continue their health insurance coverage after a qualifying event.

Employers and plan administrators are responsible for:

Providing notice of the COBRA rights to employees and their dependents when a qualifying event occurs. This includes providing information about how to enroll in COBRA coverage and the cost of the coverage.

• Continuation of coverage: Ensuring that employees and their dependents have the option to continue their existing health coverage for a period of 18 to 36 months, depending on the type of qualifying event.
• Premium collection: Collecting the full premium for COBRA coverage from employees and their dependents, including the portion of the premium that was previously paid by the employer.
• Compliance with the law: Ensuring that the plan is in compliance with all the provisions of COBRA, including those related to qualifying events, notice requirements, and continuation of coverage.
• Subsidy: Ensuring that eligible individuals get the COBRA Subsidy provided as a part of American Rescue Plan Act (ARPA) for certain individuals who are involuntarily terminated from their employment between April 1, 2021 to September 30, 2021.
• Recordkeeping: Maintaining records of compliance with the COBRA provisions, including records of notice provided, premiums collected, and continuation coverage periods.

Employees are responsible for:

• Familiarizing themselves with COBRA rights and provisions, including the qualifying events that trigger the right to continue coverage and the costs of COBRA coverage.
• Enrolling in COBRA coverage within the required time frame, if they choose to do so.
• Paying the full premium for COBRA coverage, including the portion of the premium that was previously paid by the employer.
• Notifying the employer or plan administrator of any changes in their status that might affect their eligibility for COBRA coverage.

Comprehensive Omnibus Budget Reconciliation Act of 1985 Sanctions and Remedies

The EBSA can impose sanctions on employers or plan administrators who violate COBRA provisions, including fines, penalties, and even criminal charges.

Sanctions may be imposed for a variety of reasons, such as failing to provide notice of COBRA rights, failing to provide continuation of coverage, failing to collect the correct premium or failing to provide required disclosures to plan participants.

Remedies can include:

• Civil penalties: Employers or plan administrators can be fined for violating certain provisions of COBRA.
• Restitution: The EBSA can seek restitution for losses suffered by plan participants as a result of violations of COBRA.
• Injunctions: The EBSA can seek court-ordered injunctions to prevent or correct violations of the law.
• Criminal prosecution: In cases of fraud or other criminal violations, the EBSA can refer the matter to the U.S. Department of Justice for prosecution.

It is important for employers and plan administrators to comply with the COBRA provisions to avoid potential sanctions and remedies. Employers should also take the necessary steps to ensure they are aware of their responsibilities under the law and have processes in place to comply with the law’s requirements.