Consolidated Omnibus Budget Reconciliation Act of 1986

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The Consolidated Omnibus Budget Reconciliation Act, commonly referred to instead by its acronym COBRA, is a U.S federal statute from 1986 known best for its provisions that modified the Employee Retirement Income Security Act, a federal law governing employee benefit plans, to require those plans to provide the right to choose to continue group health care benefits provided by their group health plan to workers and their dependents who have lost their health care benefits under certain circumstances. COBRA also provides similar protections for employees and their dependents who participate in "governmental plans", that is, employee benefit plans established by state and local governmental entities for their employees that would not otherwise be covered by ERISA. Employees of the federal government, who are likewise not covered by ERISA, are also entitled to similar protections.

The Act allows both workers and their immediate family members who had been covered by a health care plan to maintain their coverage if a "qualifying event" causes them to lose coverage. Among the "qualifying events" listed in the statute are loss of benefits coverage due to (1) the death of the covered employee, (2) a reduction in hours (which can be the result of resignation, discharge, layoff, strike or lockout, medical leave or simply a slowdown in business operations) that causes the worker to lose eligibility for coverage, (3) divorce, which normally terminates the ex-spouse's eligibility for benefits, or (4) a dependent child reaching the age at which he or she is no longer covered. COBRA imposes different notice requirements on participants and beneficiaries, depending on the particular qualifying event that triggers COBRA rights. COBRA also allows for longer periods of extended coverage in some cases, such as divorce, than others, such as reduction in hours.

COBRA does not apply, on the other hand, if employees lose their benefits coverage because the employer has terminated the plan altogether. COBRA provides some protections for employees and their dependents in those cases in which a business changes ownership.

COBRA does not, unlike other federal statutes such as the Family and Medical Leave Act, require the employer to pay for the cost of providing continuation coverage; instead it allows employees and their dependents to maintain coverage at their own expense by paying no more than 102 percent of the premium the employer previously paid. Employees and dependents can also opt for a lesser form of coverage, e.g., to choose continuation coverage under a plan that only covers the employee, but not his or her dependents, or that only provides medical and hospitalization coverage and does not pay for dental work, if those options are available to covered employees. Employees and dependents lose coverage if they fail to make timely payments of these premiums.

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