According to data from the Bureau of Labor Statistics (BLS), nearly one-third of individuals with at least some college or an associate’s degree have held 15 or more jobs between the ages of 18 and 48.
Why is that important? Well, that figure should drive home the point that employees are unlikely to spend years and decades with the same company. It’s one of those “in your face” reminders about the reality of the daunting turnover rate in the restaurant industry as well as why understanding the basics of COBRA is imperative for restaurateurs.
Below is a brief overview and guide designed to simplify COBRA.
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, mandates that group health plans offer continuing insurance coverage for employees and their spouses, former spouses, and dependents during specific life events.
These events may include any of the following:
- Death of the employee;
- Termination of the employee;
- Decrease in employee’s work hours (for reasons unrelated to misconduct);
- When an employee becomes eligible for Medicare;
- Divorce or legal separation of an employee and spouse; and
- Loss of dependent status for a child.
It’s important to note that there is a 60-day election period following the loss of coverage during which COBRA can be purchased. The person electing coverage is called a qualifying beneficiary.
Which Group Health Plans are Included?
In general, all group health plans held by private sector employers who have 20 or more employees are subject to COBRA regulations.
Some states have their own laws regarding COBRA, so be sure to check with your state’s insurance commissioner office to verify local legislation. In some cases, there may be mini- COBRA available, which requires group health plans to provide some coverage for employers with fewer than 20 employees.
What Is the Cost of COBRA?
While the continuation of coverage during these life events can be a great help, the cost of COBRA can be prohibitive. Prior to a qualifying event, the employer usually pays a portion of the employee’s insurance costs. With COBRA, the qualifying beneficiary pays the full cost.
Legally though, premiums cannot exceed the full cost of coverage plus a two percent administration fee.
How Long Does COBRA Last?
A group health plan may elect to provide longer coverage periods. However, COBRA typically covers either 18 or 36 months from the date of the qualifying event.
If the qualifying event is the result of termination or reduction in work hours, the coverage period is 18 months.*
If the qualifying event is the result of termination or reduction in work hours AND the employee became eligible for Medicare less than 18 months prior, then COBRA will cover the spouse and dependents for 36 months following the date the employee became entitled to Medicare.
*Extended coverage: There are two additional instances where coverage can be extended past the 18 months — (1) If the COBRA beneficiary becomes disabled or (2) a second qualifying event occurs.
Do Employees Have Any Other Insurance Options?
Employees may have a few options besides COBRA:
Seek coverage under spousal or parental health plan. While health plans generally have well-defined open enrollment periods, they will allow for enrollment outside of those timeframes when a qualifying event occurs. Choosing to enroll under a spouse’s or parent’s plan may be an option, so long as the request for enrollment occurs within 30 days of the loss of coverage.
Shop on the Health Insurance Marketplace. Even if you choose to purchase COBRA coverage, you may still be able to purchase coverage on the Health Insurance Marketplace, plus retain your eligibility for any potential subsidies. To be eligible, insurance must be purchased within 60 days of the loss of employer-based coverage.
Verify eligibility for Medicaid or other low-cost plans. Through the Marketplace, you can also see whether you qualify for Medicaid or another low-cost option like the Children’s Health Insurance Plan (CHIP).
Requirements for Employers
Employers are required to provide qualifying beneficiaries with up to four notices regarding COBRA. Each is listed below along with a brief description of the contents:
- General or Initial Notice: Summarizes the employees’ rights under COBRA.
- Election Notice: Explains how to elect continuation of coverage.
- Unavailability of Continuation of Coverage Notice: Informs the employee or qualifying beneficiary that coverage is unavailable.
- Termination of Coverage Notice: Notifies of the termination or end of COBRA coverage.
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What has been your experience with COBRA? What other questions do you have? Please join the conversation below.
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Copyright © Carrie Luxem 2019 All Rights Reserved
Legal Disclaimer: The information I publish is not legal advice but rather is intended to prompt a discussion on best practices in human resources. Further, federal and state laws are amended frequently and vary significantly from jurisdiction to jurisdiction. Therefore, the published information may not be current at the time that you read it or it may not be applicable to your jurisdiction. As such, you should not rely upon any of the published information without first consulting directly with Restaurant HR, legal counsel, and reviewing your local, state, and federal laws as well as any applicable industry practices and company policies.
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