Consolidated Omnibus Budget Reconciliation Act (COBRA)
COBRA Defined - The COBRA health benefit provisions became law 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 employer-sponsored group health coverage that otherwise might be terminated.
COBRA contains provisions giving certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.
COBRA Defined - Group 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 non profit related organizations. (The Federal Employees Health Benefit Program is subject to generally similar, although not parallel, temporary continuation of coverage provisions under the Federal Employees Health Benefits Amendments Act of 1988). Under COBRA
, a group health plan ordinarily is defined as a plan that provides health care benefits for the employer's employees and their dependents through insurance or another mechanism such as a trust, health maintenance organization, self-funded pay-as-you-go basis, reimbursement or combination of these.
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 another mechanism such as a trust, health maintenance organization, self-funded pay-as-you-go basis, reimbursement or some combination of these. Medical benefits provided under the terms of the plan and available through COBRA may include:
- Inpatient and Outpatient Hospital
- Physician Care
- Surgery and other Major Medical Benefits
- Prescription Drugs
- Medical Flexible Spending Accounts
- Any other Medical Benefits such as Dental and Vision
Penalty to Employers
It can become very expensive if you're caught doing the wrong thing. Regulatory penalties for COBRA are usually charged per violation, per person, per day for the entire period of noncompliance. For instance, if you don't properly inform qualified people about their rights to continued coverage, you can be fined $100 per day per individual and up to $200 a day with dependents. You might be forced to pay present and future medical expenses that would otherwise have been covered by insurance. One employer had to cough up $1 million in medical claims for twins born prematurely when COBRA coverage was accidentally cut off.
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