Under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA), employees -- and their spouses and dependents -- can continue their group health insurance coverage after an occurrence that would otherwise terminate coverage, such as the employee getting laid off or the employee's spouse getting divorced. Benefits last from 18 to 36 months, depending on the circumstances.
Employees who are covered by their employer's group health insurance plan can continue their coverage even after a "qualifying event" that would otherwise terminate their coverage. Qualifying events for employees include quitting, getting laid off or fired (for reasons other than gross misconduct), or getting a cut in hours that brings the employee below the employer's threshold to qualify for benefits.
An employee's spouse and dependents can also continue their coverage if any of the qualifying events above occurs. In addition, spouses and dependents can continue coverage after the employee dies, the employee and spouse divorce or legally separate, the employee becomes eligible for Medicare, or the dependent loses dependent status under the plan.
An employee (or spouse or dependent) who continues benefits through COBRA must pay the full cost of coverage. However, because employers typically negotiate lower group insurance rates, this amount is almost always less than it would cost to purchase an individual insurance policy.
The duration of COBRA benefits depends on the qualifying event.
If the qualifying event is the employee's quitting, termination, or reduction in hours, COBRA benefits last for 18 months.
If the qualifying event is the employee's death, the employee's divorce or legal separation, or the dependent's loss of dependent status under the plan, COBRA benefits last for 36 months. This is true even if the initial qualifying event was the employee's termination, quitting, or reduction in hours. For example, if Mary is receiving COBRA benefits through her husband John, after he was laid off from work, she and John would be entitled to 18 months of benefits. If John died while they were receiving benefits, Mary would be eligible for a total of 36 months of benefits.
COBRA coverage can be extended from 18 to 29 months if the qualifying event is the employee's termination, quitting, or reduction in hours, and the beneficiary either has a disability at the time of the qualifying event or becomes disabled during the first 60 days of COBRA coverage. (There are other requirements that must be met as well.)