The first question from one just terminated from his job is: What is COBRA and what are my rights and my options. Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. First of all, COBRA can only be offered to employees and or their dependents if the employer has 20 or more employees. An employer can not legally keep an employee on his insurance plan if he or she is not a full time employee unless he or she qualifies for COBRA benefits. The employee and or his dependents can only stay on the past employers plan for up to 18 months unless the employee was released do to a disability. In the case of a disability the employee can stay on the plan for up to 29 months. In the case of employee death, legal separation, divorce or separation, or if the spouse becomes entitled to Medicare, the spouse and dependent children are entitled to 36 months of coverage. If a dependent child looses dependent child status he or she would also be eligible for 36 months of continued coverage. The down side to the COBRA option is that if you develop a medical condition while on the plan you may not be able to get the individual plan of your choice. The other negative is that the employer can charge up to 102% of his cost for regular COBRA and up to 150% of the last 11 months if you qualify as being disabled. I know this seems backwards, but that’s the way it is. Often COBRA is more expensive than an individual plan, but on the plus side if you enroll in another group plan with no more than a 62 day lapse in coverage there is no waiting for any preexisting condition. If there is a lapse in coverage of more than 62 days, preexisting condition will have a one year wait before being covered. Remember that you must decide within 60 days of the qualifying event if you want to take the COBRA coverage. Then you have 45 days to make your first payment from the date you elect to take the coverage. Payment must be made for back to the qualifying event. This can amount to 90 days or more. Life insurance benefits are not covered by COBRA. This is just a brief summary of COBRA. For additional information contact your employer. They are required by law to furnish information to you on a timely basis or face severe penalties.

What are the penalties? Although no longer as harsh as the penalties prior to TAMRA, current IRS COBRA penalties are still severe. The emplorer may pay an excise tax penalty of $100 per day for each day of noncompliance, but if a family is involved, the maximum amount of tax per day is $200 per family.

How high can the penalties go? Penalties may be as high as $2500 for each beneficiary affected by the failure of the employer to comply. If the IRS finds a violation that it considers to be more than just minimal, employers may be subject to a penalty of as much as $15,000. The maximum any employer could be taxed in a given year is $500,000 or ten percent of the health plan costs in the previous year, whichever is less.

Richard Evans