What is COBRA coverage, and how does it work?

COBRA, the Consolidated Omnibus Budget Reconciliation Act, is a U.S. federal law requiring certain employers (typically those with 20 or more employees) to offer temporary health insurance to employees and their dependents after certain qualifying events, such as job loss or reduced work hours. Employees or their dependents are responsible for the cost of this temporary coverage, which can last for about 18 months, depending on the state.

Who is eligible for COBRA coverage?

To be eligible for COBRA coverage, individuals must have been enrolled in their employer's group health plan and experience one of several qualifying events. These events include termination of employment, a reduction in work hours, divorce, the death of the employee, and more. Even being enrolled in the health plan for just one day before a qualifying event occurs is sufficient.

What are the responsibilities of companies under COBRA requirements?

Employers subject to COBRA must inform their employees about their health insurance rights, both when enrolling in the company's health plan and when a qualifying event occurs. Companies must provide clear, written notices explaining the process for selecting COBRA coverage and the associated timeframe. Failure to comply with these rules can result in penalties and fees.

How does COBRA affect non-U.S. companies with employees in the U.S.?

Non-U.S. companies with employees in the U.S. may also be subject to COBRA regulations. Understanding and complying with COBRA rules and global benefits is essential for these companies to avoid penalties and fees. Global payroll solutions with expertise in this area can provide tools, reporting services, and support to help companies meet COBRA-related requirements and educate their employees about COBRA options.