Understanding What COBRA Is
What Is COBRA?
COBRA is the acronym for The Consolidated Omnibus Budget Reconciliation Act of 1985. This act was passed to temper the increasing rate of uninsured Americans. As a result of economic recession in the early 1980’s, many working Americans lost their jobs. Those Americans that lost their jobs also lost their employer-sponsored health coverage for them and their families.
The continuation coverage requirement forces employers to offer continued insurance coverage to anyone who would otherwise lose coverage due to a qualifying event. Qualifying events include:
- Termination of Employment
- Reduction in Hours
- Divorce or Legal Separation
- Death of the Enrolled Employee
- Dependent ceasing to be eligible under the terms of the plan
- The covered employee becomes entitled to Medicare
- Bankruptcy (applies only to retirees)
Who Regulates COBRA?
COBRA is a federal law whose provisions appear in three different places: the Employee Retirement Income Security Act (ERISA); the Internal Revenue Code (IRS); and the Public Health Service Act (PHSA). Generally the provisions for COBRA read the same in all three areas. Provisions for group health plans for the private sector can be found with ERISA and the IRS. PHSA COBRA provisions are for group health plans of the state and local governments.
Both the IRS and DOL (Department of Labor) have issued COBRA regulations. The IRS COBRA regulations generally relate to questions clarifying COBRA while the COBRA regulations issued by the DOL relate to the notices and disclosers that employers, plan administrators, and qualified beneficiaries must provide.