Consolidated Omnibus Budget Reconciliation Act

The Consolidated Omnibus Budget Reconciliation Act, commonly referred to as COBRA, was enacted in April 1986. This law provides employees, spouses, and dependents with continuing health care coverage after coverage is lost due to a qualifying event such as loss of job, reduced hours, death or divorce of spouse, death or divorce of parent, and change in status as dependent.

Under COBRA, workers who lose their job for any reason other than "gross misconduct" can elect to continue their coverage for up to 18 months. The same eligibility applies to employees who leave their job voluntarily, as well as to the employee's spouse and dependent children in the event of the employee's death or divorce. A recent U.S. Supreme Court ruling, Geissal v. Moore Medical Corp. (1998), stated that an employer cannot deny COBRA coverage just because an individual is covered by another group plan during the time of COBRA election.

COBRA applies to most public and private group health plans and employers must comply if they maintain group health plans that offer health care benefits to workers. The maximum coverage period is generally 18 months. Employees are required to pay up to 102 percent of the premium for coverage, but this is typically less expensive than acquiring similar coverage on their own. Employees wishing to elect COBRA coverage must do so within 60 days after their coverage would otherwise end.

The Internal Revenue Service issued final regulations on COBRA in February 1999. Key changes between earlier proposed versions of the rules and the final regulations require plan sponsors and administrators to review their administrative procedures. These procedures must comply with the law. The regulations apply to qualifying events occurring in plan years beginning on or after January 1, 2000. In general, all employer-sponsored plans must comply with COBRA requirements, but some exceptions are provided for health care obtained at facilities located on the employers' premises, long-term care services, health flexible spending arrangements, and small employer plans.

For more information on COBRA, see the online article titled "Know Your Cobra Rights" (October 12, 1999).