The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA, is a federal law that requires employers offering healthcare benefits to offer the option of continuing such coverage to qualified beneficiaries—at their own expense—who would otherwise lose these benefits due to employment termination, reduction in hours or certain other events. COBRA applies to employers with 20 or more employees.
A qualified beneficiary is anyone covered under an employer’s group health plan on the day before an event that causes loss of coverage.
Qualified beneficiaries include:
- Employees, including part-time employees
- Their spouses and dependents
- Retirees (unless they are eligible for Medicare)
- Partners in a partnership
COBRA coverage does not need to be offered to the following individuals:
- An employee who is not yet eligible for the employer’s group health plan
- An eligible employee who declined to participate in the employer’s group health plan
- An individual who is enrolled for benefits under Medicare
Health plan, Flexible Spending Account (FSA) and employee assistance program (EAP) benefits are COBRA eligible. Additional coverage may vary by state.