A Guide To COBRA Insurance For Employers

A reality of running a business is that at times you have to part ways with an employee. While it is never a pleasant experience, there are some responsibilities to consider when terminating an employee or even reducing their hours.

If you have had to terminate an employee, do you need to keep them on your Group Health Insurance Plan?

The short answer is no. You don’t need to continue paying their insurance, however, you must offer them to apply for COBRA insurance.

How Does COBRA Insurance Work?

First off, COBRA is short for the ‘Consolidated Omnibus Budget Reconciliation Act’.

COBRA is an insurance program that allows eligible employees and their dependents continued benefits of health insurance coverage when an employee loses their job or experiences a reduction of work hours.

Health insurance coverage from COBRA extends for a limited period of 18 or 36 months, depending upon applicable scenarios.

For anybody who has lost health insurance benefits during the 2020 coronavirus pandemic, the U.S. Department of Labor (DOL) released a new final rule that temporarily extends the period to 60 days to enroll.

It is important to note that the cost of COBRA coverage is usually higher because the newly unemployed individual pays the entire cost of the insurance. Employers typically pay a significant portion of healthcare premiums for employees. This extra cost can make this coverage more expensive for you, even though it’s the same health plan.

Are All Past Employees Eligible for COBRA?

Most previous employees are eligible for COBRA by one of the following qualifying events:

The employee is no longer employed for any reason other than gross misconduct.
The employee’s hours are cut by the company.

Employees who work for a company with at least 20 full-time employees and who have been enrolled under their employer’s insurance for at least one day are eligible for Federal COBRA.

There is no minimum number of workdays required to be eligible for COBRA.

Offering COBRA and CAL-COBRA to Previous Employees 

Federal COBRA applies to employers and group health plans that cover 20 or more employees.

If an employee voluntarily quits or gets terminated COBRA helps them to extend their health insurance coverage generally for 18 months. If your business in California has between 2 and 19 employees you are covered by CAL-COBRA.

Cal-COBRA is a California Law that allows ex-employees to keep their group health plan when their employment ends or their hours are cut. It may also be available to people who have exhausted their Federal COBRA.

What Benefits are Covered under Federal COBRA and Cal-COBRA?

Cal-COBRA applies to employers and group health plans that cover from 2 to 19 employees.

For previous employees, here are their benefits under COBRA and CAL-COBRA:

Under COBRA, previous employees will have the same benefits as other employees in the same health plan. There are no restrictions because of pre-existing conditions.

If the group benefit includes specialized plans, such as dental or vision plans, they must be offered to previous employees under Federal COBRA. However, if a previous employee changes from Federal COBRA to Cal-COBRA, these specialized plans do not have to be offered.

Giving Notice for COBRA

Group health plans must give each employee and each spouse of an employee who becomes covered under the plan a general notice describing COBRA rights.

The general notice must be provided within the first 90 days of coverage. Group health plans can satisfy this requirement by including the general notice in the plan’s SPD and giving the SPD to the employee and to the spouse within this time limit.

Before a group health plan must offer continuation coverage, a qualifying event must occur. The group health plan is not required to act until it receives an appropriate notice of such a qualifying event.

The employer is required to notify the plan if the qualifying event is:

  • Termination or reduction in hours of employment of the covered employee;
  • Death of the covered employee; or
  • Covered employee’s becoming entitled to Medicare.

The employer has 30 days after the event occurs to provide notice to the health plan.
After receiving a notice of a qualifying event, the plan must provide the qualified beneficiaries with an election notice, which describes their rights to continuation coverage and how to make an election.

The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event.

Assistance for Employers with COBRA

Ideally, it is better to work with a third party admin service that handles all the COBRA paperwork for your company.

There are many ways you can run into trouble legally handling your own COBRA paperwork, and we don’t recommend most businesses doing it this way.

If you have your group benefits plan with us here at Jackson and Jackson Insurance offer a free third-party administrative service to handle all your COBRA paperwork.

If you’d like more information on COBRA or have questions on any other insurance-related topic. please contact us, we’re here to help!

Jackson & Jackson Insurance Agents and Brokers offer commercial and business insurance with over 80 years of experience serving the San Dimas, Glendora, and LaVerne business communities.

We offer all lines of group health insurance that can provide you with a choice of health insurance providers based on your needs, to see what works best for your business.

Request Your Proposal Here

Are you ready to save time, aggravation, and money? The team at Jackson & Jackson Insurance is here and ready to make the process as painless as possible. We look forward to meeting you!

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