Consolidated Omnibus Budget Reconciliation Act of 1985

Last updated
Consolidated Omnibus Budget Reconciliation Act of 1985
Great Seal of the United States (obverse).svg
Long titleAn Act to provide for reconciliation pursuant to section 2 of the first current resolution on the budget for fiscal year 1986
Acronyms (colloquial)COBRA
Announced inthe 99th United States Congress
Citations
Public law99-272
Statutes at Large 100  Stat.   82
Codification
Acts affected Employee Retirement Income Security Act of 1974
Legislative history

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is a law passed by the U.S. Congress on a reconciliation basis and signed by President Ronald Reagan that, among other things, mandates an insurance program which gives some employees the ability to continue health insurance coverage after leaving employment. COBRA includes amendments to the Employee Retirement Income Security Act of 1974 (ERISA). The law deals with a great variety of subjects, such as tobacco price supports, railroads, private pension plans, emergency department treatment, disability insurance, and the postal service, but it is perhaps best known for Title X, which amends the Internal Revenue Code and the Public Health Service Act to deny income tax deductions to employers (generally those with 20 or more full-time equivalent employees) for contributions to a group health plan unless such plan meets certain continuing coverage requirements. The violation for failing to meet those criteria was subsequently changed to an excise tax.

Contents

Although this statute became law on April 7, 1986, its official name is the Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub. L.   99–272, 100  Stat.   82). Because of the discrepancy between the official name of the Act and the year in which it was enacted, [1] some government publications refer to the Act as the Consolidated Omnibus Budget Reconciliation Act of 1986.

Provisions

As originally enacted, Title X of the Act provided that a qualifying employer will not be permitted to take a tax deduction for its health insurance costs unless its health insurance plan allows employees of the employer and the employee's 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. However, the legislation was subsequently amended to instead impose an excise tax upon an employer whose health plan fails to satisfy the applicable rules. A qualifying employer is generally an employer with 20 or more full-time-equivalent employees. [a]

Among the "qualifying events" listed in the statute are loss of benefits coverage due to (1) the death of the covered employee; (2) an employee loses eligibility for coverage due to voluntary or involuntary termination or a reduction in hours as a result of resignation, discharge (except for "gross misconduct" [4] [5] ), layoff, strike or lockout, medical leave, or slowdown in business operations; (3) divorce or legal separation that 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. [b] COBRA imposes different notice requirements on participants and beneficiaries, depending on the particular qualifying event that triggers COBRA rights. [c] See DOL.GOV's FAQs For Employers About COBRA Continuation Health Coverage

COBRA does not apply if coverage is lost because the employer has terminated the plan altogether or because the employer has gone out of business.

COBRA allows for coverage for up to 18 months in most cases. If the individual is deemed disabled by the Social Security Administration, coverage may continue for up to 29 months. [d] In the case of divorce from the former employee, the former spouse's coverage may continue for up to 36 months. In the case of death of the former employee, the widow's coverage may continue for up to 36 months. [e]

COBRA does not apply to businesses with fewer than twenty employees, but the majority of states have stepped in with state health insurance continuation laws, sometimes called "mini-COBRA" laws, which apply in these cases. [10] Some of these are described below.

COBRA does not, unlike other federal statutes such as the Family and Medical Leave Act (FMLA), 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 the full cost of the premium the employer and the employee previously paid, plus up to a 2% administrative charge (50% for the latter 11 months under the disability extension).

According to the U.S. Department of Labor: [11]

...the coverage you are given must be identical to the coverage that is currently available under the plan to similarly situated active employees and their families (generally, this is the same coverage that you had immediately before the qualifying event). You will also be entitled, while receiving continuation coverage, to the same benefits, choices, and services that a similarly situated participant or beneficiary is currently receiving under the plan, such as the right during an open enrollment season to choose among available coverage options. You will also be subject to the same rules and limits that would apply to a similarly situated participant or beneficiary, such as co-payment requirements, deductibles, and coverage limits.

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. Employers are required to inform employees and dependents upon loss of coverage, in writing, by at least fifteen days before the coverage ceases.

Coordination of coverage

An individual covered under COBRA may also be covered by another group health plan or Medicare [12] as long as either of two conditions is met: [13]

Under COBRA, the following individuals may be eligible for continuation coverage: [14]

  1. Employees: Full-time and part-time employees who were covered by a group health plan sponsored by an employer with 20 or more employees.
  2. Spouses: Spouses of covered employees who were enrolled in the group health plan.
  3. Dependent Children: Dependent children of covered employees who were enrolled in the group health plan.
  4. Qualified Beneficiaries: Individuals who were covered under the group health plan but lost coverage due to a qualifying event, such as the death of the covered employee, divorce or legal separation, a reduction in work hours, or the employee's eligibility for Medicare.

COBRA coverage is typically temporary and individuals may be required to pay the full premium for the coverage, including the portion previously paid by the employer. The duration of COBRA coverage can vary depending on the specific qualifying event and the state in which the individual resides. Employers that provide COBRA qualified insurance are required to provide information about rights and coverage options to individuals eligible for coverage under the plan. [15]

Subsidy under federal stimulus

Only 10% of Americans eligible for COBRA insurance in 2006 used it, many because they were unable to afford to pay the full premium after their job loss. [16] While some employers may voluntarily help subsidize or fully cover the cost of COBRA insurance as part of a termination or exit package, it is more common for the ex-employee to cover the entire cost. [17]

The American Recovery and Reinvestment Act of 2009 as signed by President Barack Obama includes a 65% subsidy to employees for COBRA-enabled insurance for up to 9 months [18] after an involuntary termination (this has since been expanded to 15 months). An employee is eligible for this subsidy if

If the employee has an adjusted gross income in 2009 over $125,000 if filing as single ($250,000 if filing jointly), then the subsidy will be recaptured in a phased manner from the employee through the tax system.

Termination of employment must have occurred between September 1, 2008 and December 31, 2009 (later expanded to February 28, 2010, expanded again to March 31, 2010, and then expanded again to June 2, 2010). Specific provisions and responsibilities may differ in the state specific mini-COBRA plans for employers with fewer than 20 employees throughout half of the previous calendar year. Those employees who are eligible for the ultimate benefits of this subsidy are referred to as Assistance Eligible Individuals (or AEIs).

Employers subject to Federal COBRA are required to: [18]

This Act was signed into law by President Barack Obama on February 17, 2009.

On December 19, 2009, President Obama signed into law the Department of Defense Appropriations Act, 2010, which made several amendments to the COBRA provisions of the American Recovery and Reinvestment Act of 2009 (ARRA). The Act extends COBRA subsidy eligibility to employees who lost their jobs due to no fault of their own between January 1 and February 28, 2010. The nine-month subsidy period was also expanded to fifteen months. [19] [20]

On March 3, 2010, President Obama signed into law the Temporary Extension Act of 2010. [21] The Act extends COBRA subsidy eligibility to employees who lost their jobs due to no fault of their own between March 1 and 31, 2010. [22] In addition, employees who lost group health insurance due to reduced work hours on or after Sept. 1, 2008, followed by involuntary termination between March 2 and March 31, 2010, will now be eligible for the COBRA subsidy. [23]

The Continuing Extension Act of 2010 extends premium assistance for COBRA benefits through May 31, 2010. [24]

As of June 2010, an extension of COBRA's premium assistance has not materialized, and attempts by congressional members to include such provisions have been dropped. As of June 1, 2010, all newly unemployed workers must pay full coverage costs as determined by their respective plans. [25] This is due in part to conservative Democrats in Congress who have expressed concerns about treating some unemployed workers differently from others, such as people priced out of the private insurance market. [25] A number of Senate Democrats expressed concern about this situation and have introduced legislation to expand COBRA coverage to people who become unemployed through November 2010, [25] but such legislation did not pass in 2010.[ citation needed ]

The American Rescue Plan Act of 2021 included a provision to fully cover COBRA premiums from April through September 2021. [26]

Similar state and local legislation

Forty-one states have legislation similar to federal COBRA requiring employers to allow employees and their dependents to continue their group health insurance coverage following certain qualifying events. [27] [28] The District of Columbia also has laws covering COBRA.

California

California's legislation applies to non-government employers with a group health insurance plan with fewer than twenty employees. [29]

District of Columbia

The District of Columbia's Continuation of Health Coverage Act of 2001 applies to employers with a group health insurance plan with a situs in the District of Columbia and with fewer than twenty employees. Coverage must be offered to be extended for a period of three months following the date that coverage would have ended. [30]

Maryland

Maryland's legislation only applies to employers with a group health insurance plan with a situs in Maryland and with fewer than twenty employees that continuation coverage must be offered to an employee who lives in Maryland, who had coverage from the employer for at least three months, and who either resigns or loses employment due to no fault of their own. Continuation coverage must also be offered to the former spouse and dependent children of an employee after a divorce. One exception to the eighteen-month rule is that coverage may end for the former spouse upon the former spouse's remarriage. Continuation coverage must also be offered to the surviving spouse and dependent children of an employee who dies. The employee must have resided in Maryland and had coverage with the employer for at least three months prior to death. In all cases, continuation coverage must be offered for eighteen months, with the exception that a former spouse's continuation coverage ends upon remarriage. [31]

Virginia

Virginia's legislation applies to employers with a group health insurance plan, other than an HMO plan, and with twenty or fewer employees. Employers must offer continuation coverage to employees for twelve months. [32] The legislation does not apply to employees who did not have coverage from the employer for at least three months prior to the qualifying event. [33]

Notes

  1. ↑ ERISA cites "(more) than 20 employees on a typical business day during the preceding calendar year". [2] All employees must be counted, even employees who have voluntarily waived group health coverage or who are not eligible for group health coverage due to part-time status. Employees who work less than full-time must be counted as a fraction of a full-time employee based on the employees' work hours. [3]
  2. ↑ Qualified beneficiaries must notify the plan administrator of a divorce, legal separation, or a dependent child ceasing to be a dependent under the terms of the plan within 60 days of the later of either the date of the event or the date coverage would be lost as a result of the event. [6]
  3. ↑ The first day of leave under the Family Medical Leave Act of 1993 (FMLA) is not a qualifying event for COBRA purposes. The qualifying event for COBRA occurs if and when it becomes known that the employee will not be returning from the leave. [7]
  4. ↑ COBRA coverage must be allowed 29 months of COBRA coverage if the qualifying beneficiary is deemed by the Social Security Administration, under Title II or Title XVI, to have been disabled before the end of the first 60 days of COBRA continuation coverage. In order for these rights to apply, the employer needs to be informed of the Social Security Administration's disability determination before the 18-month period has elapsed and within 60 days of the date it is received by the disabled qualified beneficiary. If one member of a family qualifies for the 29-month period, then the entire family qualifies for the 29-month period. [2] [8]
  5. ↑ Another extended coverage period involves Medicare eligibility. If an end of employment occurs less than 18 months after the employee's Medicare entitlement, qualified beneficiaries other than the covered employee must be allowed 36 months of COBRA coverage from the date of the Medicare entitlement. Qualified beneficiaries then have 36 months from the date of Medicare entitlement or 18 months from the end of employment, whichever is longer. A covered employee must be allowed 18 months of COBRA coverage from the end of employment. [2] [9]

See also

Related Research Articles

<span class="mw-page-title-main">Medicare (United States)</span> US government health insurance program

Medicare is a federal health insurance program in the United States for people age 65 or older and younger people with disabilities, including those with end stage renal disease and amyotrophic lateral sclerosis. It was begun in 1965 under the Social Security Administration and is now administered by the Centers for Medicare and Medicaid Services (CMS).

<span class="mw-page-title-main">Health Insurance Portability and Accountability Act</span> United States federal law concerning health information

The Health Insurance Portability and Accountability Act of 1996 is a United States Act of Congress enacted by the 104th United States Congress and signed into law by President Bill Clinton on August 21, 1996. It aimed to alter the transfer of healthcare information, stipulated the guidelines by which personally identifiable information maintained by the healthcare and healthcare insurance industries should be protected from fraud and theft, and addressed some limitations on healthcare insurance coverage. It generally prohibits healthcare providers and businesses called covered entities from disclosing protected information to anyone other than a patient and the patient's authorized representatives without their consent. The bill does not restrict patients from receiving information about themselves. Furthermore, it does not prohibit patients from voluntarily sharing their health information however they choose, nor does it require confidentiality where a patient discloses medical information to family members, friends or other individuals not employees of a covered entity.

Health insurance or medical insurance is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among many individuals. By estimating the overall risk of health risk and health system expenses over the risk pool, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to provide the money to pay for the health care benefits specified in the insurance agreement. The benefit is administered by a central organization, such as a government agency, private business, or not-for-profit entity.

A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), HSA funds roll over and accumulate year to year if they are not spent. HSAs are owned by the individual, which differentiates them from company-owned Health Reimbursement Arrangements (HRA) that are an alternate tax-deductible source of funds paired with either high-deductible health plans or standard health plans.

In the United States, a flexible spending account (FSA), also known as a flexible spending arrangement, is one of a number of tax-advantaged financial accounts, resulting in payroll tax savings. One significant disadvantage to using an FSA is that funds not used by the end of the plan year are forfeited to the employer, known as the "use it or lose it" rule. Under the terms of the Affordable Care Act however a plan may permit an employee to carry over up to $550 into the following year without losing the funds but this does not apply to all plans and some plans may have lower limits.

Long-term care insurance is an insurance product, sold in the United States, United Kingdom and Canada that helps pay for the costs associated with long-term care. Long-term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid.

<span class="mw-page-title-main">Medicare Part D</span> United States prescription drug benefit for the elderly and disabled

Medicare Part D, also called the Medicare prescription drug benefit, is an optional United States federal-government program to help Medicare beneficiaries pay for self-administered prescription drugs. Part D was enacted as part of the Medicare Modernization Act of 2003 and went into effect on January 1, 2006. Under the program, drug benefits are provided by private insurance plans that receive premiums from both enrollees and the government. Part D plans typically pay most of the cost for prescriptions filled by their enrollees. However, plans are later reimbursed for much of this cost through rebates paid by manufacturers and pharmacies.

A Health Reimbursement Arrangement, also known as a Health Reimbursement Account (HRA), is a type of US employer-funded health benefit plan that reimburses employees for out-of-pocket medical expenses and, in limited cases, to pay for health insurance plan premiums.

<span class="mw-page-title-main">Tricare</span> U.S. Department of Defense health care program

Tricare is a health care program of the United States Department of Defense Military Health System. Tricare provides civilian health benefits for U.S Armed Forces military personnel, military retirees, and their dependents, including some members of the Reserve Component. Tricare is the civilian care component of the Military Health System, although historically it also included health care delivered in military medical treatment facilities.

The Balanced Budget Act of 1997 was an omnibus legislative package enacted by the United States Congress, using the budget reconciliation process, and designed to balance the federal budget by 2002. This act was enacted during Bill Clinton's second term as president.

The Medicare Part D coverage gap was a period of consumer payments for prescription medication costs that lay between the initial coverage limit and the catastrophic coverage threshold when the consumer was a member of a Medicare Part D prescription-drug program administered by the United States federal government. The gap was reached after a shared insurer payment - consumer payment for all covered prescription drugs reached a government-set amount, and was left only after the consumer had paid full, unshared costs of an additional amount for the same prescriptions. Upon entering the gap, the prescription payments to date were re-set to $0 and continued until the maximum amount of the gap was reached or the then current annual period lapses. In calculating whether the maximum amount of gap had been reached, the "True-out-of-pocket" costs (TrOOP) were added together.

Self-funded health care, also known as Administrative Services Only (ASO), is a self insurance arrangement in the United States, whereby an employer provides health or disability benefits to employees using the company's own funds. This is different from fully insured plans where the employer contracts an insurance company to cover the employees and dependents.

A Health and welfare trust (HAWT) or Health and welfare plan (HAWP) is a tax-free vehicle for financing a corporation's healthcare costs for their employees. They were introduced in 1986 by Canada Revenue Agency (CRA) in their interpretation bulletin entitled IT-85R2. Many companies offer this product to Canadian employers.

A Private Health Services Plan in Canada is Health and/or Dental Care, as part of an insured Group Insurance Plan or a self-insured plan, such as a Health Spending Account, Cost-Plus Plan or one of the three options under a Health and Welfare Trust.

In 1972 the United States Congress passed legislation authorizing the End Stage Renal Disease Program (ESRD) under Medicare. Section 299I of Public Law 92-603, passed on October 30, 1972, extended Medicare coverage to Americans if they had stage five chronic kidney disease (CKD) and were otherwise qualified under Medicare's work history requirements. The program's launch was July 1, 1973. Previously only those over 65 could qualify for Medicare benefits. This entitlement is nearly universal, covering over 90% of all U.S. citizens with severe CKD.

In the United States, health insurance helps pay for medical expenses through privately purchased insurance, social insurance, or a social welfare program funded by the government. Synonyms for this usage include "health coverage", "health care coverage", and "health benefits". In a more technical sense, the term "health insurance" is used to describe any form of insurance providing protection against the costs of medical services. This usage includes both private insurance programs and social insurance programs such as Medicare, which pools resources and spreads the financial risk associated with major medical expenses across the entire population to protect everyone, as well as social welfare programs like Medicaid and the Children's Health Insurance Program, which both provide assistance to people who cannot afford health coverage.

The Empowering Patients First Act is legislation sponsored by Rep. Tom Price, first introduced as H.R. 3400 in the 111th Congress. The bill was initially intended to be a Republican alternative to the America's Affordable Health Choices Act of 2009, but has since been positioned as a potential replacement to the Patient Protection and Affordable Care Act (PPACA). The bill was introduced in the 112th Congress as H.R. 3000, and in the 113th Congress as H.R. 2300. As of October 2014, the bill has 58 cosponsors. An identical version of the bill has been introduced in the Senate by Senator John McCain as S. 1851.

The Equal Access to COBRA Act was a bill which would amend the Internal Revenue Code, the Employee Retirement Income Security Act of 1974, and the Public Health Service Act to extend COBRA health insurance coverage to qualified beneficiaries, defined to include domestic partners. The bill was introduced on March 25, 2010, by Senator Barbara Boxer. It was also later introduced by Representative Anthony Weiner on March 10, 2011.

Health care finance in the United States discusses how Americans obtain and pay for their healthcare, and why U.S. healthcare costs are the highest in the world based on various measures.

The Affordable Care Act (ACA) is divided into 10 titles and contains provisions that became effective immediately, 90 days after enactment, and six months after enactment, as well as provisions phased in through to 2020. Below are some of the key provisions of the ACA. For simplicity, the amendments in the Health Care and Education Reconciliation Act of 2010 are integrated into this timeline.

References

  1. ↑ Discrepancies between the date in the official title of a U.S. budget Act and the date on which the Act was signed into law occur with some frequency. See, for example, the Deficit Reduction Act of 2005, signed into law in February 2006.
  2. 1 2 3 Omnibus Budget Reconciliation Act of 1989
  3. ↑ 1987 Final COBRA Regulations
  4. ↑ Zickafoose v. UBServices, Inc., 23 F.Supp.2d 652, 655 (S.D.W.Va.1998). "Conduct is gross misconduct if it is so outrageous that it shocks the conscience."
  5. ↑ When an employee is discharged for gross misconduct, the employer is not required to offer COBRA continuation coverage to the employee, the employee's spouse, or the employee's dependents. See Mlsna v. Unitel Communications, Inc. 41 F.3d 1124 (7th Cir. 1994).
  6. ↑ Tax Reform Act of 1986.
  7. ↑ Family and Medical Leave Act of 1993.
  8. ↑ Health Insurance Portability and Accountability Act of 1996 (HIPAA)
  9. ↑ Small Business Job Protection Act of 1996
  10. ↑ "Not Eligible for COBRA for Health Insurance? You Might Still be Eligible for Mini-Cobra Health Insurance Continuation". myhealthcare.com. March 11, 2010. Archived from the original on 3 March 2016. Retrieved 1 October 2020.
  11. ↑ "Benefits Under Continuation Coverage" section of Department of Labor - Employee brochure Archived 2013-12-27 at the Wayback Machine
  12. ↑ Geissal v. Moore Medical Corp. 524 U.S. 74 (1998)
  13. ↑ "COBRA Coordination with Other Benefits". Centers for Medicare & Medicaid Services. 6 November 2006. Archived from the original on 30 November 2009. Retrieved 8 October 2009.
  14. ↑ "Welcome to Benefits.gov | Benefits.gov". www.benefits.gov. Retrieved 2023-05-25.
  15. ↑ "Continuation of Health Coverage (COBRA)". DOL. Retrieved 2023-05-25.
  16. ↑ Rovner, Julie (January 28, 2009). "Bill Aims To Subsidize Health Care For Laid-Off". NPR. Retrieved 2009-11-08.
  17. ↑ "COBRA - Reducing the Costs". HealthHarbor. Archived from the original on 2009-10-11. Retrieved 2009-11-08.
  18. 1 2 "DOL Information Related to the American Recovery and Reinvestment Act of 2009". Department of Labor. Archived from the original on 2009-11-04. Retrieved 2009-11-08.
  19. ↑ "FAQs On The COBRA Premium Reduction Extension Provisions". Department of Labor. Archived from the original on 2010-05-05. Retrieved 2010-03-01.
  20. ↑ Block, Sandra (January 5, 2010). "Another COBRA extension helps with health insurance". USA Today.
  21. ↑ "H.R. 4691: Temporary Extension Act of 2010". govtrack.us. Civic Impulse, LLC.
  22. ↑ Pender, Kathleen (March 3, 2010). "Federal unemployment benefits, Cobra subsidy extended for one month". San Francisco Chronicle.
  23. ↑ Geisel, Jerry (March 3, 2010). "Obama signs stopgap COBRA subsidy extension". Business Insurance. Crain Communications, Inc.
  24. ↑ "H.R.4851 – Continuing Extension Act of 2010". May 20, 2010.
  25. 1 2 3 Alonso-Zaldivar, Ricardo (June 12, 2010). "Obama faces rare defeat on health help for jobless". Yahoo News. Associated Press. Archived from the original on June 15, 2010. Retrieved June 12, 2010.
  26. ↑ Nova, Annie. "Government will fully cover laid-off workers' COBRA premiums through September". CNBC. Retrieved 12 March 2021.
  27. ↑ "State Continuation Coverage". American Diabetes Association. Archived from the original on August 13, 2012. Retrieved June 27, 2012.
  28. ↑ "State Continuation Coverage". Healthcare.gov. U.S. Department of Health & Human Services. Retrieved 2021-07-30.
  29. ↑ "Health and Safety Code, Section 1366.20-1366.29" . Retrieved 2018-01-04.
  30. ↑ "Bulletin No. 01-LG-004-12/18". Department of Insurance, Securities and Banking. Government of the District of Columbia. December 18, 2011. Archived from the original on February 19, 2007. Retrieved June 27, 2012.
  31. ↑ "Bulletin 08-13" (PDF). Insurance Administration. State of Maryland. May 30, 2008. Archived from the original (PDF) on September 1, 2011. Retrieved June 27, 2012.
  32. ↑ "Virginia House Bill 315 Extends State Continuation Coverage to 12 Months" (PDF). CareFirst BlueChoice; CareFirst BlueCross BlueShield. via M.T. Donahoe & Associates, LLC. June 25, 2010. Retrieved June 27, 2012.
  33. ↑ "Virginia Acts of Assembly: 2010 Session: Chapter 503" (pdf). Legislative Information System, Division of Legislative Automated Systems. State of Virginia. Retrieved June 27, 2012.

Private websites

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.