COBRA Premiums: HSA Eligibility

What is COBRA insurance?

COBRA insurance is designed to give workers who have lost/quit a job or experienced a cut in their working hours the ability to pay premiums for and keep the group insurance plans that they would otherwise lose in these situations. COBRA, which stands for Consolidated Omnibus Budget Reconciliation Act of 1985, contained a series of amendments to the Employee Retirement Income Security Act of 1974 (ERISA). In most cases, employees who experience major changes in their careers will receive a notice from their company's benefits administrator to inform them that their group health insurance coverage is ending and they now have the option to elect COBRA benefits if they so desire (U.S. Department of Labor).

COBRA has a series of important stipulations that both business owners and employees should be mindful of. First, COBRA is only offered to employees of companies that have 20 or more workers, but certain states have laws on the books that require companies with 20 or less employees to offer healthcare coverage for a required period of time. In general, COBRA insurance coverage will last for 18 months after a worker loses group insurance benefits and elects COBRA, and in some cases this period can be extended to 36 months (such as disability extensions), but these numbers are largely dictated by the qualifying event for COBRA election.

What are COBRA qualifying event notices?

Employees who experience these major changes in their careers will receive a notice from their company's benefits administrator called an "election notice" to inform them that their group health insurance coverage is ending and they now have the option to elect COBRA benefits if they so desire. While COBRA is most often associated with a change in job status, this insurance is also available as a response to qualifying life events, including via American Cancer Society:

• Divorce
• Loss of status as a dependent
• Death of a spouse
• Employee meets Medicare eligibility age (age 65)
• Employer files for Chapter 11 bankruptcy

Employees have 30 days after these events to notify the group health plan administrator of this qualifying event (60 days for divorce, legal separation or child's loss of dependent status). At this point, the employer has 14 days to issue an election notice that contains all the written information needed to understand COBRA rights and to decide whether to continue coverage. The employee or qualified dependents then have 60 days to choose health insurance coverage under COBRA or opt for individual insurance through the state's healthcare marketplace.