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Understanding COBRA 
 
by Christopher Welsh May 25, 2005

Who is eligible?

Chances are you are. If you work for a company that employs 20 or more employees, then your company’s health plan falls under COBRA, which takes you most of the way towards eligibility. There are three parts to qualifying for COBRA coverage. (Note: you will notice references to ‘the plan’ throughout this article. Recall that COBRA provides for continuation of benefits under the same plan you had under your employer; as such, many of those plan rules will still apply. At its simplest, COBRA allows you to keep your identical benefits for a while longer, where you might normally not be able to do so.) The three parts to eligibility are:

1. Your employer must offer group health coverage and employ 20 or more workers. This makes the plan fall under COBRA law.

2. You have to be a Qualified Beneficiary; this may seem odd, as mostly when the word ‘beneficiary’ is used one thinks of someone other than oneself. However, in this case, a Qualified Beneficiary refers to the employee, the spouse of the employee and/or the dependent children of the employee. In some cases, retirees and their spouses and dependant children may be considered Qualified Beneficiaries as well.

3. There has to be a Qualifying Event, which is a circumstance that results in you losing your coverage. There are different Qualifying Events depending on what kind of Qualified Beneficiary you are, as outlined below.

Employee

  • Voluntary or involuntary termination of employment for reasons other than "gross misconduct”
  • A reduction in work hours that would result in cancellation of benefits

Spouse

  • If the employee loses coverage for either reason above
  • If the employee dies
  • If there is a divorce or legal separation
  • If the employee becomes eligible for Medicare

Dependent Child

  • Loss of ‘dependant child’ status according to the plan (often when the child is over 19 and not a full-time student; although, even this rule varies from state to state.)

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