Cobra and who is Eligible


COBRA. It doesn’t always refer to a dangerous snake. It’s also the name of a piece of Federal legislation that, among other things, protects you if become ineligible for your employer-provided medical insurance. Federal COBRA laws apply the employer has more than 20 full-time workers. If your employer has less than 20 full-time workers you aren’t eligible for Federal COBRA protection, but you may be protected by similar laws at your state level.

In order to enjoy protection under COBRA, you must actually be in the plan when you become ineligible. If you aren’t a part of the plan at that time, you do not have COBRA rights. Employer-sponsored plans define who is eligible to be covered. You will find the plan specific guidelines in your policy or plan booklet. Typical criteria are:

Your classification as an employee: hourly or salaried; full-time or part-time; seasonal or permanent.

How many hours per week you work. Common variations are 40 hours, 36 or 32 hours or sometimes 20 hours.

Whether or not you are considered a full-time employee (even though your weekly hours may sometimes turn out to be above or below the stated number).

How long you have worked for your employer, often 30, 60 or 9 days.

The plan must specify that dependents are eligible to join the plan.

The plan will specify the maximum age of dependent children, often 18 or 19 years.

The plan will specify the maximum age of dependent children who are full-time students, often between 21 and 25 years old.

You and/or your dependents become in-eligible to stay covered under the plan when you drop out of the pre-defined classification that made you eligible in the first place. You may be fired or laid off: you are no longer an employee and therefore no longer eligible for the plan. But you will be eligible to stay in the plan under COBRA. Likewise, if you go from full-time to part-time status, thus not working the required number of hours per week, you will no longer be eligible for the plan. But you will be eligible to stay in the plan under COBRA. If you retire, you obviously will not be working the required number of hours per week. Same thing, you’ll be eligible to stay on the plan under COBRA. If you become disabled and are unable to work, or unable to work the required number of hours per week, ditto – you are no longer eligible under the definition of the plan, but you and your covered dependents will be eligible for COBRA. If you die, well, clearly you are not working the required number of hours per week (even though it may appear that you are getting just as much done as you did before) AND you won’t really need the coverage anymore, but your dependents may need the coverage and they will no longer be eligible, since you are no longer an eligible employee. In this case your dependents will have specific rights regarding staying in the plan. In the case of a legal separation or a divorce, your former spouse won’t be eligible for the plan (since he or she is no longer a spouse) but, you guessed it, he or she will have the right to stay on the plan by notifying the employer of their intent to do so, and by making the monthly payments.

The reason, whatever causes you or your dependents to become ineligible, is called a Qualifying Event. When a qualifying event occurs, your employer is required, by law, to inform you and your covered dependents of your rights and what you need to do to maintain those rights. The law states that you and/or your dependents be notified in writing by First Class Mail, generally within 14 days of the qualifying event. Once you are notified of your rights you must in turn tell your employer of your intention to continue your coverage, and you must start paying for that coverage within the timeframe described in the notification. The notice will outline all of the deadlines you must meet, what your monthly cost will be to stay in the plan, and how and where you need to send the money. The one situation in which your former employer is not required to extend COBRA benefits to you is if you are fired for Gross Misconduct. While YOU are not eligible to stay on the plan in this case, your covered dependents are. The rules regarding gross misconduct are specific, and you must be notified that you will not be extended COBRA benefits because of the Gross Misconduct.

With the employer notification letter in hand, COBRA is not really all that difficult to understand. Your employer is required to send you a letter outlining all of the rules at two specific times: 1) when you are first eligible to join the plan and 2) after a qualifying event which causes you and/or your dependents to lose coverage.

Follow the rules and your employer must allow you to stay in the plan for the required length of time, usually 18 months – but up to 36 months for your dependents if they lose eligibility due to divorce, your death or disability, or their attaining the maximum age allowed on the plan.

Keep in mind that the employer is not required to contribute anything towards the cost of the coverage. You may experience sticker shock when you learn what the real cost of the coverage is. But, at least you do have the right to stay in the plan, especially as you explore more affordable options.