Losing health insurance coverage can happen unexpectedly, whether due to job changes, family transitions, or other life events. That’s where COBRA comes in.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives employees and their families the right to continue group health benefits under certain circumstances where coverage would otherwise end. Understanding what triggers COBRA eligibility is essential for both employers and employees to ensure coverage continuity and compliance with federal law.
Who is affected by COBRA qualifying events
COBRA qualifying events can impact:
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- Employees who lose coverage due to job-related changes
- Spouses who lose coverage because of divorce, legal separation, or death of the employee
- Dependent children who lose coverage when they age out or no longer meet plan eligibility criteria
The 7 qualifying events defined by COBRA law
1. Termination of employment (not due to gross misconduct)
If an employee’s job ends, whether because of resignation, layoff, retirement, or discharge for reasons other than gross misconduct, COBRA coverage may be offered. The key trigger here is the loss of employer-sponsored health coverage due to the termination.
2. Reduction in work hours
A reduction in hours that causes an employee to lose eligibility for health benefits also qualifies as a COBRA event. This could include transitioning from full-time to part-time, being placed on furlough, or taking an extended unpaid leave (not covered under the Family and Medical Leave Act).
3. Divorce or legal separation
When an employee becomes legally separated or divorced, their spouse may lose coverage under the employee’s health plan. COBRA gives the spouse and any eligible dependents the option to continue coverage for a limited time.
4. Death of the covered employee
If a covered employee passes away, the surviving spouse and dependent children can lose access to the employer-sponsored health plan. COBRA provides an opportunity for them to maintain coverage for a defined period.
5. Loss of dependent child status
Children who no longer meet the plan’s definition of a dependent, most often when they reach age 26, experience a qualifying event. This allows them to elect COBRA continuation coverage for up to 36 months.
6. Employee becomes entitled to Medicare
When an employee becomes entitled to Medicare, it can affect the health coverage available to their spouse or dependents, particularly in retiree plans. In these cases, dependents may be eligible to continue coverage through COBRA.
7. Employer bankruptcy (for retiree plans)
Employer bankruptcy is a unique COBRA event that primarily affects retirees and their families. If a company goes bankrupt and terminates retiree health coverage, COBRA continuation rights may be triggered, sometimes allowing extended or lifetime continuation options depending on the circumstances.
Duration of COBRA coverage by event
The length of COBRA coverage depends on the qualifying event:
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- 18 months: For termination of employment or reduction in hours
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- 36 months: For divorce or legal separation, death of the covered employee, Medicare entitlement, or loss of dependent child status
- Employer bankruptcy: Coverage duration may vary, especially for retirees and dependents
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Additional COBRA eligibility considerations
Not every health plan is required to offer COBRA. To qualify:
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- The employer must have 20 or more employees on more than 50% of its typical business days in the previous calendar year.
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- Only group health plans are subject to COBRA, not life, disability, or other types of insurance.
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- Qualified beneficiaries include employees, spouses, and dependent children who were covered the day before the qualifying event.
- Each qualified beneficiary has an independent right to elect COBRA, meaning a spouse or child can choose coverage even if the employee declines.
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What happens after a qualifying event
After a qualifying event occurs:
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- Employers must notify their plan administrator of the event within 30 days (for termination, reduction in hours, or death).
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- The plan administrator then notifies qualified beneficiaries of their COBRA rights within 14 days.
- Employees and dependents have 60 days to elect COBRA coverage, beginning from the date of notice or loss of coverage, whichever is later.
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Timely communication is critical to maintain compliance for employers and to avoid lapses in coverage for employees and their families.
Conclusion
Knowing what counts as a COBRA qualifying event ensures that both employers and employees understand their rights and responsibilities when coverage changes. By recognizing these triggers early and understanding election timelines, individuals can make informed decisions to maintain their health benefits, and employers can stay compliant with COBRA regulations.
Planning ahead and keeping lines of communication open can make navigating these transitions much smoother for everyone involved.
