Understanding COBRA Qualifying Events and Employer Responsibilities

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that applies to various organizations, including:

  • private employers who employed 20 or more employees in the prior year;
  • state governments; and
  • local governments.

COBRA allows employees to continue coverage under their employer-sponsored health plan if they lose coverage due to a “qualifying event.”  It also allows dependents of employees (e.g., a spouse or child) who were enrolled in the plan to continue their coverage.  

Qualifying Events

The following constitute “qualifying events” which permit an employee to elect COBRA should they lose coverage under their health plan:

  • a voluntary or involuntary termination of employment (other than because of gross misconduct); or
  • a reduction of hours that causes them to lose eligibility for the health plan.

The dependents of an employee can elect COBRA for the reasons mentioned previously, and because of the following additional events:

  • divorce or legal separation from the employee;
  • employee’s enrollment in Medicare;
  • death of the employee; and
  • a child no longer qualifies as a dependent (usually because they have reached age 26).

While dependents are permitted to enroll in COBRA when the employee enrolls in Medicare, the Medicare rules prohibit employers from terminating coverage for active employees who enroll in Medicare. This means the event is generally used to extend the maximum period of COBRA coverage for a spouse who previously enrolled in COBRA when the employee terminated employment or had their hours reduced.    

Special COBRA rules also apply to health coverage provided to retirees and their families if the employer files for Chapter 11 bankruptcy. 

Notice Requirements

It is important for employers to recognize when a “qualifying event” occurs, as they are required to send impacted individuals an election notice explaining their COBRA rights and enrollment opportunities. 

The employer has 44 days to furnish an election notice to an employee or dependent who has lost coverage due to a termination of employment, reduction in hours, death of the employee, the employee’s enrollment in Medicare, or following a bankruptcy (in the case of retiree health coverage).

When the qualifying event is due to divorce or legal separation or a child ceasing to be a dependent under the terms of the plan, the dependent must notify the employer of the event within 60 days or the right to elect COBRA is forfeited. 

Election notices are a critical aspect of COBRA compliance, as failure to send a timely election notice can expose the employer to liability for the cost of medical expenses as well as penalties imposed by the Department of Labor (DOL). 

Contact our support team for additional information about COBRA, including how to meet your requirements for providing election notices.