COBRA – Continuation of Medical Coverage After Employment Has Ended
COBRA is a comprehensive federal law called the Consolidated Omnibus Budget Reconciliation Act (“COBRA”).
The purpose of COBRA
COBRA allows employees covered by health insurance plans to continue to get health benefits for a limited time after losing their jobs.
Distinction between COBRA and ERISA
The general distinction between COBRA and ERISA in its application to health insurance benefits provided by ones employer is when the employment ends. Under certain conditions, the former employee is eligible to purchase COBRA coverage to replace the lost employer-sponsored coverage under ERISA.
Therefore even though COBRA can appear separate and distinct from the employer’s ERISA plan, a former employee with COBRA coverage will be able to participate in their former employer’s ERISA plan by paying the premiums themselves.
Is Everyone Who Loses Their Job Eligible for COBRA Benefits?
No. Under the Department of Labor, the law requires the employer to have at least 20 or more employees within their existing company-wide health insurance program.
Even if you are still employed but are removed from the payroll for some reason, such as long-term maternity leave, your employer must allow you to continue your health benefits through COBRA.
Can I use COBRA if I get fired?
Yes – unless you were fired for gross misconduct. Usually, this means having done something unlawful.
To be eligible to receive COBRA benefits, the loss of employment must have been triggered by a “qualifying event” such as:
- Being laid off
- Becoming eligible for Medicare
- Loss of available work hours
- Divorce of a covered employee,
- Legal separation of a covered employee.
- Medicare entitlement of covered employee
- Death of a covered Employee
What Health Benefits Will I Get Under COBRA?
Your health benefits under COBRA should be identical to the health benefits you had while you were employed.
Must I pay to receive health benefits under COBRA?
Yes. Choosing to continue your health benefits under the COBRA, you will have to pay the employer’s monthly cost (the “group rate”) of keeping you on the plan.The amount of your premium will depend on how good your benefits were and what your employer was paying to cover you.
Choosing your health coverage through COBRA is almost always cheaper than an individual plan.
It would be best if you considered all your options before deciding in favor of COBRA continuation coverage. There may be more affordable benefits and coverage options through other group health plan coverage such as:
- Your spouse’s plan
- Medicaid
- Other marketplace coverage
How long do my benefits last?
Generally, you may receive COBRA insurance benefits for 18 months after you leave the payroll.
How do I apply for benefits?
Your employer must notify your health insurance company within fourteen days of your removal from the payroll.
Your employer or health insurance company must send you information about your COBRA rights within 30 days. You should receive information on how to apply for coverage, how much you will have to pay, and how to pay.
You can still get medical attention while your employer or the insurance company is processing your COBRA forms because COBRA rights are “retroactive” (i.e., they will cover you back to the date you left the payroll).
What Happens To My COBRA Benefits If My Employer Goes Bankrupt?
Consider The Following Dilemma:
I am 58 and have worked for the same textile factory for nearly twenty years. My health care benefits were paid through my employer, who has since filed for bankruptcy.
I have been diagnosed with Diabetes and cannot afford to lose my medical benefits. I have called the company but have yet to be able to reach anyone about my COBRA rights.
What are my options?
The stated policy goal of COBRA is to provide workers like yourself that have lost their health benefits because of retirement or termination of employment with a continuation of their health benefits for a specific period of time.
However, when an employer bankruptcy is the cause of the separation, the normal channels for collecting your COBRA benefits have drastically changed.
Types Of Employer Bankruptcy
Should your employer declare bankruptcy under chapter 11, the company is likely in the process of reorganizing. This indicates you will have some chance of recovering your benefits under COBRA.
COBRA Under Chapter 11
Chapter 11 reorganization usually means that your former employer stays in business under the court’s protection and supervision while the company attempts to reorganize its financial affairs and contractual obligations.
Chapter 11 bankruptcy on your COBRA health plan
If the insurance plan is continued, it will operate according to the plan’s master document, and all COBRA obligations will remain intact. However, if the company decides to terminate the group health plan and no other program exists, all coverage and all COBRA obligations cease.
Under these circumstances, your employer must give you sixty days’ notice before your coverage ends. During that time, you should receive a certificate of creditable coverage, which you will need to apply for a new policy.
COBRA Under Chapter 7
A Chapter 7 bankruptcy usually means your former employer is liquidating its assets to pay creditors and ceases to exist. This probably means your employer likely has terminated your health benefits and any pensions you had with your company.
COBRA Before Bankruptcy Proceedings End
Having learned your company has filed for bankruptcy, but before final discharge, you will want to contact the plan administrator.
If this person is unavailable, you should contact the attorney representing your employer in the bankruptcy case.
If the employer owes you money, the sooner you make your claim as a creditor, the faster you get on the list of potential receivers. Either way, the bankruptcy trustee will be negotiating and adjudicating these types of issues.
Another possibility is that if you belong to a union, you should contact your representative and request a status on the benefits owed to you.
If you communicate with the administrator, the employer’s attorney, or the union representative, make sure you are prepared and ask the following questions.
Questions To Ask Employer Administrator
Before contacting the administrator, trustee, or union representative, it is strongly advised that you acquaint yourself with the plan’s provisions and consult with an experienced labor lawyer.
You will want to know how your health benefits will be treated when the plan is terminated. You should have received a written copy of the plan when the company hired you.
Specific Question
- Will the plan continue, or will it be terminated?
- Who will be acting as the plan administrator during and after the bankruptcy?
- Will a trustee be managing the plan, and what is the contact information for this person?
- How will accrued benefits be calculated and paid if the benefits plan is terminated?
- How will outstanding health claims be paid if the health plan is terminated?
Be Informed
The plan will also summarize how your health plan would be managed and under what contingencies the plan may be affected.
Finally, you will want to gather as much information as possible to substantiate the length of your employment, compensation, and contributions to the health plan. Your individual benefit statements provide you with much of this information.
For more information you can visit the U.S. Department of Labor
Consult With A Labor Lawyer
Should you have specific questions or require additional information about your legal rights and obligations, we strongly advise you to consult with a verified online Employment or Labor Lawyer about your issues as soon as possible.
