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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 (ERISA), the Internal Revenue Code and the
Public Health Service Act to provide continuation of group health coverage
that otherwise would be terminated.
COBRA
contains provisions
giving certain
former employees, retirees, spouses and dependent children
the right to temporary
continuation of health coverage at group rates. This coverage, however, is
only available in specific
instances. Group health coverage for COBRA participants is usually more
expensive than health
coverage for active employees, since usually the employer formerly paid a
part of the premium. It is ordinarily less expensive, though, than
individual health coverage.
The
law generally covers group health plans maintained by employers with 20 or
more employees in the prior year. It applies to plans in the private sector
and those sponsored by state and local governments. The law does not,
however, apply to plans sponsored by the Federal government and certain
church- related organizations.
Group health plans sponsored by private sector employers generally are
welfare benefit plans governed by ERISA and subject to its requirements for
reporting and disclosure,
fiduciary standards and enforcement. ERISA neither establishes minimum
standards or benefit eligibility for welfare plans nor mandates the type or
level of benefits offered to plan participants. It does, though, require
that these plans have rules outlining how workers become entitled to
benefits.
Under COBRA, a group health plan ordinarily is defined as a plan that
provides medical benefits for the employer's own employees and their
dependents through insurance or otherwise (such as a trust, health
maintenance organization, self-funded pay-as-you-go basis, reimbursement or
combination of these).
