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COBRA Compliance. All you need to know as an Employer
COBRA law is a health insurance policy that governs employee health insurance. Your business's cobra compliance is essential if you have...
Isabel García
HR Consultant
20 of January, 2025
The Consolidated Omnibus Budget Reconciliation Act, also known as COBRA Continuation Coverage or COBRA for short, is a health insurance plan that is mandatory for all businesses in the private sector that have over 20 employees and has a group health plan. Therefore, COBRA compliance is essentially the act of being in compliance with the COBRA law.
In this article, we would be providing you with all you need to know about COBRA law, COBRA compliance, and so much more.
What is COBRA law?
COBRA law is a health insurance policy that governs employee health insurance. This policy states that workers (and their families) maintain the right to continue enjoying the benefits of group health plans they belong to for a limited period of time, even in situations where they would have otherwise lost coverage.
These situations often referred to as qualifying events include:
- Job loss (whether voluntary or involuntary).
- A shift from full-time to part-time employment.
- They become entitled to Medicare coverage.
- The employee goes into active military duty.
- Retirement.
COBRA coverage doesn’t extend to just your employees. COBRA also covers employee family members who are under the employee’s group health plan. These family members remain covered by this act even if:
- They get divorced from the employee who was covered by the plan.
- The covered employee dies.
How does COBRA work?
COBRA technically works as a stopgap, allowing employees to maintain the benefits of health plans they used to enjoy while working for a company even when they no longer work there. There is a catch here though, with these employees no longer working for the company, the employers no longer pay the share of the insurance premium and so the employee has to bear the full cost alone.
Do small businesses have to offer COBRA?
Privately owned businesses with more than 20 employees and group health plans are mandated to offer COBRA. Some state and local government-owned agencies are expected to offer these plans as well. Smaller businesses with 20 or fewer employees are not mandated to offer these plans, however, as well as businesses without group healthcare plans.
Who qualifies for COBRA?
Any employee who is (or was) covered by any company group health insurance plans qualifies for COBRA. Such employees are called qualified beneficiaries and might include:
- Employees and former employees.
- Their spouses or other family members covered in the plan.
- Retirees who are not eligible for Medicare.
To be considered a qualified beneficiary, the employee in question must have been a part of one (or more) of your company’s group health insurance plans. Family members of the employee (spouse, children, and other dependents) would also qualify if they have been enrolled in your company’s health insurance plan.
That being said, you do not have to offer COBRA coverage to the following people:
- Employees who aren’t eligible for group health plans.
- Those who do not enroll in a group health plan.
- Employees who are enrolled under Medicare.
- Domestic partners of employees who are not legally married to them.
- Other family members who are not covered under the group health plan.
If your company has over 20 employees, it is important to be in compliance with COBRA laws. Need to know if your business is COBRA compliant or ensure that it stays in compliance with these laws? Get in touch with us today.
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