The Consolidated Omnibus Budget Reconciliation Act of 1985, usually referred to as COBRA, established that companies of a certain size must offer employees and qualifying family members continued health insurance coverage if they lose coverage due to certain events.
For instance, if a person is laid off from his or her job, COBRA benefits must be extended to that individual.
Not only must companies extend COBRA benefits to former employees, but they are also legally required to notify employees of their benefit. Failing to do so can and has resulted in legal action.
The COBRA benefits extended to former employees and qualifying family members typically last for 18 months, though there are circumstances under which someone could be covered up to 36 months, or until the recipient qualifies for new health insurance coverage.
Though COBRA benefits entitle an individual and certain family members to the exact same coverage they received while employed, the former employer no longer has any obligation to pay a portion of the premium if they ever did. The responsibility of the monthly premium falls to the former employee each now that he or she is no longer employed.
If the former employee must pay his or her premium, what’s the benefit of COBRA?
The benefit of COBRA is that the person exercising his or her COBRA benefit still qualifies for the same coverage he or she had under the employer-sponsored program at the discounted rate. This reduces a significant financial burden and makes it possible for a person to care for his or her medical needs without interruption while unemployed or otherwise without health insurance coverage.
Employers Must Notify Employees of their COBRA Benefit
Employers are legally obligated to provide information to employees about their COBRA benefit. There are specific requirements concerning this notification, which includes a COBRA general notice and a COBRA election notice.
The COBRA general notice must be supplied within 90 days of an employee and his or her spouse and dependent family members gaining eligibility for an employer’s group health insurance plan. The information must include a description of COBRA and how to qualify for benefits if and when they need to do so.
In most cases, this information is provided when employees are given information about the company’s healthcare plan.
The COBRA election notice must be supplied within 14 – 44 days (depending on whether the employer uses an outside administrator) after an employee and his or her spouse and dependent family members lose health insurance coverage.
The election notice must include:
- Cost of the monthly premium
- Where to send payment for the premium
- Dates of when coverage begins and ends
- Other COBRA terms and eligibility
Those who choose to utilize COBRA benefits must opt into the program within 60 days of receiving their election notice and then must pay their initial premium within 45 days of opting into the program.
Lawsuits Related to COBRA Benefits
Investigations are currently underway into situations in which employers failed to notify and inform employees about their COBRA benefits. Employees who are not informed of their benefit eligibility might be entitled to take legal action against their current or former employers.
The most common COBRA violations include:
- Failing to offer COBRA benefits when an employee is terminated for reasons other than illegal behavior
- Failing to notify an employee’s spouse or dependents of their COBRA eligibility
- Failing to provide clear and detailed information about COBRA benefits
- Failing to provide the benefits available in the company’s group plan
If an employer or former employer is guilty of any of these violations legal action could be an option. A class action might also be appropriate if a company has consistently failed to meet its obligations and several employees have been affected.
Recent COBRA class action lawsuits have resulted in settlements and awards that allowed employees and former employees to recover financial losses due to their situation.