- 1). Learn what COBRA is. In 1986, Congress created the Consolidated Omnibus Budget Reconciliation Act (COBRA). This act affected other important legislation like the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act (PHSA). Briefly, COBRA is federal legislation that guarantees some continued group health insurance for employees after leaving their employer.
- 2). Understand what COBRA does. This legislation offers certain employees, spouses, ex-spouses and children the right to continue their employer-offered group health insurance for up to 18 months after separation from the company. The situations that COBRA covers are specified in the act.
- 3). Budget for the cost of COBRA insurance protection. If the former employee qualifies for protection, they must understand that, while the cost of continued group health insurance will remain the same as it was, it is normally more expensive as the former employer will not be contributing the monies it did while the insured was an employee.
- 4). Learn about those entitled to COBRA protection. Employers with more than 20 or more employees, including full- and part-time workers, are subject to the act. Part-time personnel are calculated at some percentage or fraction of a full-time employee in the determination of the twenty employee minimum. Qualified beneficiaries are those people covered on the day before the employee was separated from the company because of a "qualifying event."
- 5). Understand the meaning of "qualified event." These are situations that trigger COBRA coverage as specified under the act. Qualifying events for employees include, but are not limited to, voluntary or involuntary termination (except for gross misconduct activities), lay off or reduction in the hours available to work. For spouses, qualifying events include the former reasons, eligibility for medicare coverage by the employee, death of the employee, and divorce or legal separation. Dependent children qualifying events include all of the above reasons for employee and spouse.
- 6). Learn how to activate COBRA insurance. Fortunately, most of the legal requirements are on the to-do list of employers. They must notify the plan administrator and the former employee of their COBRA options within 14 days of the "qualifying event." The former covered employee (or spouse, should the employee die) can then elect to accept or reject COBRA coverage. The health insurance will directly bill the former employee on a monthly basis as coverage continues.
- 7). Designed to be user-friendly, qualified individuals have up to 60 days after notification to decide to activate COBRA insurance coverage. Those deciding to accept coverage have an additional 45 days to begin premium payment. Also, check federal and local government policies as they may have the funds to contribute to premium payments as the United States did in 2009.
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