Legal Definitions - Consolidated Omnibus Budget Reconciliation Act of 1985

The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA, is a federal law that provides certain former employees, retirees, spouses, and dependent children the right to temporary continuation of health coverage at group rates.

This law applies when health coverage would otherwise be lost due to specific "qualifying events." These events include job loss (whether voluntary or involuntary, except for gross misconduct), reduction in work hours, divorce or legal separation, death of the employee, or a dependent child losing eligibility under the plan (e.g., by turning 26). COBRA allows eligible individuals to continue their existing employer-sponsored group health plan for a limited time, typically 18 or 36 months, by paying the full premium themselves, plus a small administrative fee. Its primary purpose is to provide a bridge for individuals and families to maintain health insurance coverage until they can secure new benefits.

Here are some examples of how COBRA applies:

• Example 1: Job Termination
  Scenario: Sarah, a marketing manager, was recently laid off from her position. While she actively searches for a new job, she is concerned about maintaining health insurance coverage for herself and her two children. Her previous employer offered a comprehensive group health plan.

  How COBRA applies: Sarah's job loss is a qualifying event under COBRA. She can elect to continue her previous employer's group health plan for up to 18 months. This allows her and her children to maintain their existing medical coverage, providing peace of mind during her job search until she secures new employment with benefits.

• Example 2: Divorce or Legal Separation
  Scenario: Maria was covered under her husband David's employer-sponsored health insurance plan. After their divorce was finalized, Maria would typically lose access to that coverage because she is no longer a spouse of an active employee.

  How COBRA applies: The divorce is a qualifying event for Maria. She can elect to continue receiving health benefits under David's former group plan for up to 36 months. This provides her with crucial time to find her own employer-sponsored plan, purchase individual insurance, or enroll in a plan through a health insurance marketplace.

• Example 3: Dependent Child Aging Out
  Scenario: Michael, a recent college graduate, turned 26 and is no longer eligible to be covered under his parents' employer-sponsored health insurance plan. He is currently working part-time and does not have access to employer-provided benefits.

  How COBRA applies: Michael aging out of his parents' plan is a qualifying event. Through COBRA, he can elect to continue coverage under his parents' plan for a temporary period, typically up to 36 months. This allows him to maintain health insurance while he seeks full-time employment with benefits or explores other long-term health coverage options.