COBRA

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The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal statute, passed in 1985, that provides employees and their families the right to continue group health benefits under an employers group health plan.

COBRA only applies to group health plans offered by private-sector employers with more than 20 employees as well as to state and local governments. It doesn’t apply to the federal government.

To exercise this right, the employee must have been a member of a qualified group plan. The employee must have had a qualifying event such as voluntary or involuntary job loss, reduction in hours worked, or a divorce.

The employee is responsible for all payments for the insurance, including the former employer’s contribution, up to 102 percent of the plan’s premium for the former employee. Nonetheless, because they get to pay the employer-negotiated group rate, it is often less expensive than an individual rate. COBRA doesn’t require employees to stay on the group health plan, employees can elect to choose other options such as Medicaid or the Health Insurance Marketplace if eligible.

The continued coverage lasts for 18 months but may be extended to 36 months under certain circumstances.

The purpose of COBRA is to ensure that employees who lose their jobs receive health insurance benefits.

For FAQs on COBRA Continuation Health Coverage for Workers.

[Last updated in May of 2020 by the Wex Definitions Team]