Consolidated Omnibus Budget Reconciliation Act (COBRA)

By James Parker
/
May 22, 2022

What Is the Consolidated Omnibus Budget Reconciliation Act?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that was passed in 1985. The purpose of COBRA is to provide employees the opportunity for continuing their group health insurance coverage for themselves and their families after an event that would have removed them from coverage.

COBRA is particularly important for ensuring that employees have continuing medical care when they would otherwise lose it along with their job. Under COBRA, an employee who quits is laid off, or is fired can stay on their health care plan, with some conditions, usually greater cost. COBRA also protects former spouses and dependent children of employees in the event of a divorce.

COBRA has been included in recent legislation as well, after the beginning of the COVID-19 pandemic, as a component of the legislation, the American Rescue Plan Act of 2021, the federal government opted to pay for the COBRA insurance premiums of individuals and their families who suffered job losses as a result of the coronavirus pandemic. This government coverage applied from April 1 until Sept. 30, 2021, and was intended to protect workers struggling during the economic downturn caused by the pandemic..

Key Takeaways

  • The Consolidated Omnibus Budget Reconciliation Act exists to give employees the right to continue their group health care coverage even if circumstances prevent them from qualifying normally.
  • COBRA will activate if an employee voluntary or involuntary loses their job, has a reduction in hours, dies, or the divorces or legally separates from their spouse.
  • COBRA is generally required to last at least 18 months up to 36 months in some circumstances. During that time, the COBRA recipient may not receive any other special enrollment benefits.
  • If you have experienced a violation of your rights under the Consolidated Omnibus Budget Reconciliation Act, an experienced Employment Law attorney may be able to improve the outcome of your case by utilizing experience and expert knowledge.

The Consolidated Omnibus Budget Reconciliation Act, and Employment Law

COBRA is a landmark piece of legislation for employee health care rights. However, the scope of COBRA is limited to  health plans that are offered by private businesses and companies that have at least 20 employees, state government workers, and local government workers. Churches, church affiliated organizations, and federal employees are generally exempt from the requirements of COBRA.

COBRA also only applies under “qualifying events.” Those events include:

  • Death of the employee receiving benefits
  • Divorce from the employee receiving benefits
  • Involuntary job loss such as a layoff
  • Reductions in work hours that make the employee unqualified for benefits
  • Voluntarily quitting

If any of these qualifying events occur, the employee, former spouse, or family of the employee can apply for COBRA coverage.

If COBRA is implemented, it will last for a mandatory period of between 18 months and 36 months depending on the circumstances. Beyond the mandatory period, employers can choose to extend the offer for longer.

Choosing COBRA is not regaining the group health insurance benefit plan enjoyed by the employee. Instead, participants in COBRA must pay the premium that they payed normally, as well as the employer’s share and administrative fees for a grand total that is no more than 102% of the plan cost. In general, employers pay roughly 72-83% of the insurance premium, leaving the employee to manage the remaining 28-17%. This means that entering into COBRA can more than double the premium the employee pays. 

Despite the increase in cost, there are some reasons the employee may want to opt for COBRA. First, by law the U.S. Employee Benefits Security Administration states that if an employee chooses to use COBRA to continue coverage, then the coverage that employee receives "must be identical to the coverage currently available under the plan to similarly situated active employees and their families.”

Second, although a plan under COBRA may be expensive, it may still be cheaper than an individual health plan. If the employee cannot qualify for subsidies from programs like the Affordable Care Act, then COBRA may be the least expensive option that contains the coverage the employee needs.

Bottom Line

If you were recently fired, quit, had your hours reduced, or otherwise experienced a qualifying event but have been denied the opportunity to apply for COBRA, you may be able to file a lawsuit against your employer to receive the rights that you deserve. If you intend to file a COBRA lawsuit, you will need the help of an Employment Law attorney.

An experienced Employment Law attorney will use their trial tactics, field expertise, and battery of expert witnesses to pursue the best possible outcome for your case. An Employment Law attorney will know the fine details of COBRA and the case law that could result in you receiving the benefits that you deserve.

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