Consolidated Omnibus Budget Reconciliation Act (“COBRA”)

When an employee is terminated, they may find themselves without health insurance coverage. To assist individuals in this situation, the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) was enacted.[1] COBRA requires employers who maintain group health plans to offer employees and their family members the opportunity to pay for continued coverage under the employer’s health plan for a certain period of time.[2] 96 Though the premium charged for COBRA health coverage is generally higher than the premium charged to employed individuals.. By giving the former employees and their families a choice whether or not to continue health coverage under COBRA, the Act assists individuals who may need continued health insurance coverage while they attempt to make alternate arrangements for coverage. COBRA applies to any employers that maintain a health plan for more than 20 employees.[3]

Coverage

The coverage must consist of coverage which, as of the time the coverage is being provided, is identical to the coverage provided under the plan to similarly situated beneficiaries under the plan.[4] Typically, the coverage may extend for 18 months for terminations or reductions in hours.[5] This time may be extended upon the death of the covered employee, divorce or legal separation of the covered employee, a dependent child ceasing to be a dependent child under the plan.[6] COBRA is also available for 36 months after the death of the covered employee. [7] The period of coverage may end if the employer stops providing health care to all employees or the employee fails to pay the premium. Additionally, the plan may require payment of a premium for any period of continuation coverage, except that such premium (A) shall not exceed 102 percent of the applicable premium for such period, and (B) may, at the election of the payor, be made in monthly installments.[8]

Notice

Generally, an employer has 30 days to notify the administrator of plan. The administrator must provide written notice to the covered individual. However given the type of qualifying event, different notices may be required.[9]

Enforcement

The DOL and the IRS are responsible for enforcing COBRA and its regulations. The IRS may impose excise taxes on employers for COBRA violations of up to $100 per day per qualified beneficiary, or up to $200 per day if more than one qualified beneficiary is involved.[10] To the extent violations by the employer (or the plan in the case of a multiemployer plan) for any year are more than de minimis, a tax of “$15,000” may be imposed. Even an unintentional failure to comply with COBRA can result in an excise tax of up to $500,000 in total.[11]

 

Mini-Cobra

Utah is one of several states that have adopted a mini-COBRA scheme.[12] Under Utah statue a covered employee of an employer with less than 20 employees may extend coverage for 12 months. The Utah Mini-Cobra closely tracks COBRA in most other significant aspects.

[1] 29 USC § 1161 et seq.

[2] 29 USC § 1161.

[3] Id.

[4] 29 USC § 1162.

[5] Id.

[6] 29 USC § 1163.

[7] Id.

[8] Id.

[9] 29 USC § 1166

[10] 26 U.S.C. § 4980B(b)(l).

[11] 26 U.S.C. § 4980B(c)(4)(A).

[12] Utah Code Ann. § 31A-22-

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