This Act allows employees of private sector, state, and local governments who lose their jobs the right to accept continuing health insurance coverage, as long as the former employer had 20 or more employees in the prior year. If an employee is terminated, then he or she can accept coverage for an additional 18 months. If an employee becomes entitled to Medicare coverage or becomes divorced, then the coverage period becomes 36 months. If a spouse or dependent child of an employee loses coverage due to the death of an employee, then they can obtain coverage for up to 36 months. If a dependent child of an employee loses dependent status, then that person can obtain coverage for up to 36 months.
An employer is required to give notice of potential COBRA coverage to employees when a qualifying event occurs (employees are required to inform the health plan administrator of any divorce, disability, or dependent issues that would bring about qualification for benefits under COBRA). The impacted people then have up to 60 days in which to elect to take COBRA coverage.
If coverage is chosen, an impacted person can be required to pay up to 102% of the cost of the insurance. If one does not make timely payments under the terms of the insurance plan (within 30 days of the due date), the COBRA coverage can be terminated. COBRA coverage also will end if the employer stops providing medical coverage to its regular employees.
The penalty to an employer for not complying with the provisions of COBRA is $100 per day for each impacted individual, though the penalty will not be imposed if the employer can prove reasonable cause for the failure and also corrects the situation within 30 days from the point when non-compliance was uncovered.