Posted in Offering health benefits

When an Employee Leaves, What Do I Do About COBRA Insurance?

Sure, you’re probably already familiar with the snaky kind of cobra. But what happens when COBRA appears in all caps? We’ve got some answers for you. COBRA is actually an acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985, which was hatched to help people who are out of work keep their health insurance plans. COBRA coverage starts on the date that health insurance would have ended because of a termination, or when someone’s hours were cut back.

In this article, we’ll wind our way through each of the most important parts of COBRA. That way, you can have a roadmap if you ever need to help your team with this important kind of health coverage.

What do I have to do?

If you have 20 or more people on your team, then you’re required to provide your team members with COBRA when they leave, whether they choose to move on, are laid off, or fired.

Even companies with fewer than 20 folks may still need to offer it, depending on the state where your company is based. Scan through your state’s Department of Labor website to pinpoint your exact requirements.

If you have remote workers on your team, you’ll want to do further research about the requirements in the states where they live. There are a patchwork of rules out there — you just need to find the square you and your employees are sitting on.

The COBRA notices you need to know

When an employee leaves because they resign, are laid off, or their hours are reduced, you’ll need to make sure the following COBRA notices are sent their way. Here’s a quick synopsis of each one:

COBRA General Notice

Your insurance carrier needs to mail this notice within 90 days of the date COBRA coverage begins. It’s the first notice your team member will get, and it describes their rights under the Act. You’ll also want to meet with them before they leave or their hours are reduced to make sure they understand what COBRA is and to answer any questions they might have.

COBRA Election Notice

Health providers need to send a notice within 14 days of a qualifying event, like a resignation, layoff, or a reduction in hours. The notice should explain how they can continue their health insurance through COBRA in addition to maintaining any coverage they have for dependents.

Notice of Unavailability of Group Health Coverage

Occasionally, a group health plan will deny a request for continuation coverage or an extension of that coverage if the plan determines the requester isn’t eligible. In this case, the plan needs to send an explanation of the denial within 14 days of the qualifying event.

Early Termination Notice

COBRA is usually available for a maximum period, like 18, 29, or 36 months. If a plan has to end coverage early for some reason, the insurance carrier has to send a notice that contains the reason, the date when coverage will end, and an explanation of what people can do to continue their insurance.

COBRA health coverage usually is more expensive than employer-sponsored insurance, because companies most likely pay a chunk of their monthly premium. With COBRA, the opposite is true — participants typically pay their entire premium on their own. COBRA is a good option for any employee who has already met their deductible and anticipate more medical expenses. Therefore, it makes sense for them to keep the plan that’s handling the bill from here on out.  

Still need more information about COBRA? This guide from the DOL will help you sort out the program’s twists and turns.

COBRA was cooked up to help protect your team and give them a way to stay on their insurance even if things get rocky with their employment situation. Since you may have to offer COBRA (depending on your size) to people who leave or cut back their hours, it’s important to understand all the variables involved. And once you do, you’ll become a pro at helping your team feel more in charge on all the first days, last days — and ultimately, any day in between.