Congress passed the landmark Consolidated Omnibus Budget
Reconciliation Act (COBRA) health benefit provisions in 1986. The law
amends the Employee Retirement Income Security Act (ERISA), the
Internal Revenue Code and the Public Health Service Act to provide
continuation of group health coverage that otherwise would be
terminated.
COBRA contains provisions giving certain former employees, retirees,
spouses and dependent children the right to temporary continuation of
health coverage at group rates. This coverage, however, is only
available in specific instances. Group health coverage for COBRA
participants is usually more expensive than health coverage for active
employees, since usually the employer formerly paid a part of the
premium. It is ordinarily less expensive, though, than individual
health coverage.
The law generally covers group health plans maintained by employers
with 20 or more employees in the prior year. It applies to plans in
the private sector and those sponsored by state and local
governments.{2} The law does not, however, apply to plans sponsored by
the Federal government and certain church- related organizations.
Group health plans sponsored by private sector employers generally are
welfare benefit plans governed by ERISA and subject to its
requirements for reporting and disclosure, fiduciary standards and
enforcement. ERISA neither establishes minimum standards or benefit
eligibility for welfare plans nor mandates the type or level of
benefits offered to plan participants. It does, though, require that
these plans have rules outlining how workers become entitled to
benefits.
Under COBRA, a group health plan ordinarily is defined as a plan that
provides medical benefits for the employer's own employees and their
dependents through insurance or otherwise (such as a trust, health
maintenance organization, self-funded pay-as-you-go basis,
reimbursement or combination of these). Medical benefits provided
under the terms of the plan and available to COBRA beneficiaries may
include:
- Inpatient and outpatient hospital care
- Physician care
- Surgery and other major medical benefits
- Prescription drugs
- Any other medical benefits, such as dental and vision care
Life insurance, however, is not covered under COBRA. -
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