COBRA: Consolidated
Omnibus Budget
Reconciliation Act
What is COBRA?
In 1986, Congress passed COBRA so employees
and their families who lose their jobs can keep their
health insurance for a short time.
Information Not Legal Advice
This pamphlet is for information only and is not a
substitute for the advice of an attorney.
What is the law?
COBRA is a federal law. COBRA amended the Employee Retirement Income Security Act
(ERISA), and other federal laws to provide a way for people who lose their jobs to be able to
keep their health insurance. If you lose your job, you must pay an insurance premium to be able
to keep your health insurance coverage. This means that COBRA coverage is more expensive
than the health insurance a person had while they were working. This is because employers
usually pay part of the premium for their employees. But when a person loses his or her job, the
employer stops paying its share of the insurance premiums. This means that COBRA
participants have to pay the entire premium themselves.
Many employers buy employees group health insurance from an insurance company or health
maintenance organization (HMO). Texas law says that when your job ends or when your
COBRA coverage ends, group plans subject to the Texas Insurance code must offer you the
chance to continue your coverage for an additional 6 months. If you are not eligible for COBRA,
group plans subject to the Texas Insurance code must still offer you continued coverage for an
additional 9 months. Before your health coverage period ends, the insurance company should
send you information about how to enroll in the Texas Health Insurance Risk Pool. The Texas
Health Insurance Risk Pool covers people after their COBRA benefits end. The Risk Pool can
also be used to cover people who are not able to get COBRA.
Who Can Get COBRA Benefits?
If 20 or more people work for your employer, then your employer may have to follow COBRA. If
your employer has to follow COBRA, your group health insurance company must tell you how to
get COBRA benefits and must have a way for processing COBRA claims. This information has
to be in writing. The document that tells about COBRA coverage and how to apply for it is called
a summary plan description (SPD).
There are three things that have to happen for a person to qualify for COBRA benefits. You
must have plan coverage, be a qualified beneficiary, and a qualifying event must have occurred.
Rev. 2011
LHT 29.2
Who is a Qualified Beneficiary?
A qualified beneficiary is a person covered by an insurance policy. A qualified beneficiary can be
the employee, the employee’s spouse, or a dependent child. If a qualified beneficiary is covered
by a COBRA plan, even for one day, COBRA coverage must be made available if a qualifying
event has occurred and the qualified beneficiary loses health coverage.
What are Qualifying Events?
Qualifying events are things that cause a person to lose health care coverage. The type of
qualifying event will determine who the qualified beneficiaries are and the amount of time that
coverage must be offered under COBRA.
Qualifying events for the employee are:
 Quitting or losing your job for reasons other than “gross misconduct”;
 Reduction in the number of hours you are allowed to work.
Qualifying events for a spouse are:
 Termination of the covered employee’s employment for reasons other than “gross
misconduct”;
 Reduction in the number of hours worked by the covered employee;
 Covered employee’s becoming entitled to Medicare
 Divorce or legal separation; or
 Death of the covered employee.
Qualifying events for dependent children:
 Loss of dependent child status under the plan rules
 Termination of the covered employee’s employment for reasons other than “gross
misconduct”;
 Reduction in the number of hours worked by the covered employee;
 Covered employee’s becoming entitled to Medicare
 Divorce or legal separation; or
 Death of the covered employee.
How long does COBRA coverage last?
An employee can usually get 18 months of COBRA coverage, and an employee’s spouse or
dependent children may be eligible for up to 36 months of coverage. Sometimes, this coverage
may be extended. For example, if an employee becomes disabled, the coverage period can be
extended for up to 11 months.
Coverage starts on the date that your health insurance would have been lost because of a
qualifying event and ends at the maximum allowable period.
COBRA coverage may end early if:
 You do not pay your premiums on time;
 Your old employer stops offering any group health plan to its employees;
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After your COBRA election, you get health insurance with another employer group plan that
does not exclude coverage for a pre-existing condition; and
After your COBRA election, you become able to get Medicare. But, if you get Medicare
before your COBRA election, COBRA coverage may not be stopped.
If your plan has the option to change from group to individual health coverage, you have to be
allowed to change to an individual health insurance plan within 180 days before your COBRA
coverage ends. You cannot do this if you choose to end your COBRA coverage before the end
of your maximum allowable period of COBRA coverage.
What are the notice and election procedures?
Notice means your right to get information about your insurance coverage. Election means your
right to choose whether or not to continue your insurance coverage. A summary plan
description is a document that outlines your insurance coverage and your COBRA rights. The
plan administrator has to give you a copy of the summary plan description 90 days after you
start getting benefits, or within 120 days after the plan is first subject to provisions of ERISA.
You can also write the plan administrator and ask for a copy of the summary plan description. If
there are any material changes in coverage, the summary plan description has to be updated.
Your employer must tell the plan administrator when a qualifying event happens. This notice
must happen within 30 days of an employee’s death, termination, reduced hours of employment
or entitlement to Medicare. Some plans have a different deadline for this.
You must notify the plan administrator if you get divorced, if you legally separate from your
spouse, or if your child is no longer able to be covered as your dependent under the rules of
your insurance plan. This notice must be made within 60 days of the event. Some plans have a
different deadline for this.
When your plan administrator gets notice of your qualifying event, it has 14 days to give you
notice of your COBRA rights unless the plan document provides for a different notice period.
If your summary plan description has different notice provisions, follow the summary plan
description.
Qualified beneficiaries must be given an election period of at least 60 days. An election period is
the amount of time you have to decide if you want to have COBRA coverage. Each qualified
beneficiary may independently elect COBRA coverage. A covered employee or a spouse can
elect coverage for other qualified beneficiaries.
If you have waived COBRA and change your mind, you can revoke the waiver before the end of
the election period and still choose to get COBRA coverage.
Does COBRA cover the same things as my group plan?
People getting COBRA have to be offered coverage that is the same as the coverage that
employees of the employer are getting. If the employer changes the benefits for active
employees, the benefits will change for people who are receiving COBRA. If the employer stops
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providing health coverage for active employees, then your COBRA coverage will also be
terminated.
Who pays for COBRA coverage?
Usually, you have to pay for COBRA health coverage. The premium cannot exceed 102% of the
cost for similarly situated people. If you received an 11 month disability extension for coverage,
the premium for those additional months can increase to 150% of the cost of coverage.
You can pay your premiums monthly, weekly, or quarterly. The first premium payment has to be
made within 45 days of the date of when you elect to take COBRA. If you do not pay the
premiums on time, the insurance company can cancel your coverage.
What if I become disabled while I am on COBRA?
Your COBRA coverage can be continued if you are disabled within the meaning of the Social
Security Act. There are special rules that may extend coverage an additional 11 months.
If you are a qualified beneficiary determined to have been disabled within 60 days of COBRA
coverage, then you and all of the family may be able to extend COBRA coverage for an additional
11 months. However, you must send notice of your disability determination to your plan
administrator within 60 days of when you receive it, or you may lose your rights to extended
coverage. Any qualified beneficiary may send the notice.
What if I take Family Medical Leave?
Your employer is required to maintain health coverage for you while you are taking leave under
the federal Family Medical Leave Act. Coverage provided while you are on family medical leave
is NOT COBRA because it is not a qualifying event under COBRA rules.
What if I move out of the health plan area?
If you move out of your COBRA health plan area, you will lose your benefits. The employer is not
required to offer you a health plan in your new area.
A Word of Caution.
COBRA coverage is expensive, and you usually become eligible for COBRA at a time when
money is tight because you have lost your job or your work hours have been reduced. If you
choose not to get COBRA because it is so expensive, be careful. If you have a gap in health care
coverage of more than 60 days, you may lose important rights. Under the Health Insurance
Portability and Accountability Act (HIPAA), you cannot be denied insurance even if you have a
pre-existing condition when you change insurance plans as long as you do not have a break in
coverage for 63 days or more.
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During the 60 day COBRA election period, you might initially decide not to pay for the coverage.
because it is too expensive. As long as the election period has not expired, you may change your
mind and revoke any waiver you may have given. COBRA coverage would start on the day the
waiver was revoked.
For more information…
Contact the plan administrator of your health plan.
Legal Hotline for Texans: (800) 622-2520
Call our attorney-staffed legal hotline. Advice is free for Texans 60 and over or for anyone
eligible for Medicare.
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