COBRA and State Continuation for Employers
Maximum Period of Continuation Coverage
|Termination (for reasons other than gross misconduct) or reduction in hours of employment||Employee||18 months*|
|Employee enrollment in Medicare||Spouse||36 months|
|Divorce or legal separation||Spouse||36 months|
|Death of employee||Spouse||36 months|
|Loss of “dependent child” status under the plan||Dependent Child||36 months|
General Questions About COBRA
What is COBRA and what does it do?
What continuation protections are available to small employers?
What is a group health plan?
What group health plans are subject to COBRA?
Who pays for COBRA coverage?
What is the federal government's role in COBRA?
Questions About Employee and Beneficiary Rights Under COBRA
Who is entitled to continuation coverage under a group health plan?
When is an employee eligible for COBRA continuation coverage?
What notice are employers required to provide employees of COBRA rights?
What benefits must be covered under COBRA?
How long after a qualifying event does an employee have to elect COBRA
Is notice of denial of COBRA coverage required?
When must qualified beneficiaries be notified?
Can individuals qualify for longer periods of COBRA continuation coverage?
When can there be early termination of continuation coverage?
Are state continuation provisions applicable to employers of all sizes?
What options are there to decrease benefits?
Questions About Qualifying COBRA Events
Answers to Frequently Asked Questions About COBRA
Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. The law amends the Employee Retirement Income Security Act, the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage that otherwise might be terminated.
COBRA requires group plans to offer continuation coverage to covered employees, former employees, spouses, former spouse, and dependent children when group health coverage would otherwise be lost to due to certain specific events, referred to as qualifying events.
Those covered under group plans with less than 20 employees also have continuated protection under state law. The state law protections are designed to mirror COBRA.
A group health plan is any arrangement an employer establishes or maintains to provide employees or their families with medical care, whether it is provided through insurance, by a health maintenance organization, our of the employer's assets, or through any other means. "Medical care" for this purpose includes:
- Inpatient and outpatient hospital care;
- Physician care;
- Surgery and other major medical benefits;
- Prescription drugs;
- Dental and vision care.
COBRA generally applies to all private-sector group health plans maintained by employers having at least 20 employees on more than 50 percent of their typical business days in the previous calendar year. Both full- and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of a full time employee, with the fraction equal to the number of hours the part-time employee worked, divided by the hours an employee must work to be considered full time.
A group health plan is required to offer COBRA only to qualified beneficiaries and only after a qualifying event has occurred.
An employee must have been enrolled in the employer's health plan when working, and the health plan must continue to be in effect for active employees. COBRA continuation coverage is available upon the occurrence of a qualifying event that would, except for the COBRA continuation coverage, cause an individual to lose his or her health care coverage.
When a group health plan denies a request for continuation of coverage, notice must be provided within 14 days after the request is received. The notice must explain the reason for denying the request.
Qualified beneficiaries must be given an election period during which each qualified beneficiary may choose whether to elect COBRA coverage. Each qualified beneficiary may independently elect COBRA coverage. A covered employee or the covered employee's spouse may elect COBRA coverage on behalf of all other qualified beneficiaries. A parent or legal guardian may elect on behalf of a minor child. Qualified beneficiaries must be given at least 60 days for the election. This period is measured from the later of the coverage loss date or the date the COBRA election notice is provided by the employer or plan administrator.
The election notice must be provided in person or by first class mail within 14 days after the plan administrator receives notice a qualifying event has occurred.
Qualified beneficiaries must be offered coverage identical to that available to similarly situated beneficiaries who are not receiving COBRA coverage under the plan (generally, the same coverage the qualified beneficiary had immediately before qualifying for continuation coverage).
A change in the benefits under the plan for the active employees will also apply to qualified beneficiaries. Qualified beneficiaries must be allowed to make the same choices given to non-COBRA beneficiaries under the plan, such as during periods of open enrollment by the plan.
Group health Plan may terminate continuation coverage early for:
- Premiums are not paid in full in a timely basis.
- The employer ceases to maintain any group health plan.
- A qualified beneficiary begins coverage under another group health plan after electing continuation coverage (as long as that plan doesn't impose any exclusion or limitation with respect to any preexisting condition of the qualified beneficiary).
- A qualified beneficiary becomes entitled to Medicare benefits after electing continuation coverage;
- The notice must be given as soon as practicable after the decision is made, and it must describe the date coverage will terminate, the reason for termination, and any rights the qualified beneficiary may have under the plan or applicable law.
Any insurer offering continuation coverage, whether the continuation is pursuant to COBRA or any available state continuation, shall offer to all beneficiaries who are eligible the option to decrease benefits. The options shall include, at a minimum, those coverage options that would have been otherwise available to employees or dependents who initially enrolled into the coverage if the options decrease coverage or a carrier may offer a standardized plan to all those eligible for continuation that contains similar benefits to the beneficiaries prior coverage but at a higher deductible or other reduced benefit features.
If a person does not elect the option to decrease benefits and continues the group plan with no change in benefits, that person does not have the right to a reduction in benefits at a later date even if it is an open enrollment period under the group plan.
If you still have questions about COBRA, please contact the Division of Insurance.
Division of Insurance
SD Department of Labor and Regulation
124 S. Euclid, 2nd Floor
Pierre, SD 57501