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COBRA was passed by Congress in 1985, and amends the Employee Retirement and Income Security Act (ERISA). As enacted, employers with 20 or more employees offering group health plans are required to provide continuation of coverage to qualified beneficiaries during the course of certain qualifying events.
H.R. 1, the American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law by President Obama in 2009. Among other provisions designed to encourage economic recovery, Title III of ARRA expands the federal COBRA Continuation Coverage to provide a 65% Federal subsidy toward an eligible worker’s COBRA premium for up to 9 months. Qualified beneficiaries are defined under the law, but are generally anyone covered under the group health plan on the day before a qualifying event.
Examples of COBRA qualifying events follow below:
Spouses & Dependent Children:
Compliance with the law is mandatory and reinforced by significant fines and penalties. In addition, former employees and dependents have the right to sue former employers for COBRA coverage and damages.
As an employer, you have the following notification responsibilities under the law:
The qualified beneficiary is required to notify the plan administrator of a qualifying event within 60 days. The plan administrator then has 14 days to notify participants and beneficiaries of their continuation rights under the law. The covered individual then has another 60 days to decide to elect COBRA continuation.
Generally, COBRA coverage begins as of the date coverage under the employer-sponsored health plan has been lost and continues for a maximum of 18 months. Under certain circumstances, coverage can be extended for up to 36 months. Under California Assembly Bill 1401, an extension of COBRA may be available to participants covered under a California group contract.
Coverage will end at the earlier of these maximum periods, or:
The qualified beneficiary is required to bear the cost of continuing coverage. Generally, the premium is 102% of the cost of the plan for active participants.
HIPAA, enacted by Congress in 1996, amends the Employee Retirement and Income Security Act (ERISA). Title I of HIPAA provides protection to employees and their families when they change or lose health coverage from employment – introducing the concept of “portability” to health coverage.
The law allows employer-sponsored health plans to impose restrictions for up to 12 months for pre-existing conditions. However, this 12-month “waiting period” for coverage may be reduced by an employee’s “creditable coverage” from a prior employer.
As with the COBRA law, HIPAA mandates certain notification and disclosure requirements involving health care portability – non-compliance can result in significant fines and penalties enforced by the Department of Health and Human Services.
HIPAA also provides for the protection of the confidentiality of participants’ medical information – termed “protected health information” or PHI. This is accomplished with Title II of HIPAA, enacting the Privacy Rule which took effect in 2003.
Title II of HIPAA also introduced the concept of national standards regarding the transmission of electronic health records.