Many Texas companies think that COBRA is optional, but if you have more than 20 employees, you’re subject to Federal and State COBRA laws. Are you prepared?
In this post, we’re going to take a closer look at the legal requirements your company must adhere to under COBRA law.
Following these requirements keeps your business compliant and ensures your employees are cared for if and when they experience a qualifying event.
Table of Contents
- What is COBRA?
- What Are Employer Responsibilities?
- COBRA Eligibility
- When is An Employee Not Eligible for COBRA Coverage?
- Who Qualifies for COBRA Coverage?
- Conditions for Eligibility
- How Long Does COBRA Coverage Last in Texas?
- Administration Concerns—Do You Need Help With COBRA?
What is COBRA?
COBRA is a federal law that applies to employers with 20 or more employees. It allows employees and their families to maintain their group health insurance coverage for a limited period under specific circumstances. This helps bridge the gap until the individual can secure new health insurance.
What Are Employer Responsibilities?
Employers must provide COBRA benefits to qualified beneficiaries if they offer a group health plan.
Qualified beneficiaries are anyone who is enrolled in a group health plan on the day of an event that causes loss of coverage, which includes:
- All employees, including part-time employees, if they are participants in your plan on the day of the qualifying event
- Their dependents
- Their spouses
- Retirees
- Partners in partnership
You do not have to offer group health plan coverage under COBRA if the employee:
- Isn’t eligible for the plan
- Is eligible but didn’t sign up for your group health plan
- Is on Medicare
Employers are required to notify employees of their COBRA rights when they first become covered under the group health insurance plan and again when a qualifying event occurs. This includes sending an initial notice and a specific notice following a qualifying event.
It is critical that employers also keep immaculate records of all COBRA communications and transactions to ensure compliance and protect against potential legal issues.
COBRA Eligibility
COBRA can be triggered by several qualifying events, including:
- Divorce or legal separation
- Reduction in hours of employment
- Voluntary or involuntary job loss
- Death of the covered employee
- A dependent child losing eligibility under the plan’s terms
Each of these events can directly trigger COBRA eligibility and the duration of the coverage.
The family members of employees may also be eligible for coverage if they were already on the plan for at least one year or are under 1 year old. Coverage for spouses and dependents ends if they secure coverage elsewhere, fail to pay premiums, or the employer stops offering health insurance.
When is An Employee Not Eligible for COBRA Coverage?
However, if an employee leaves a job because of gross misconduct, which would be something unlawful, reckless, or harmful to others, they would not be eligible for COBRA.
Additionally, if an employee leaves a full-time position to switch to a part-time position, they may also lose access to their COBRA coverage.
Who Qualifies for COBRA Coverage?
COBRA coverage allows employees and their families to have coverage during qualifying events.
COBRA coverage is available to the following individuals:
- Employees who lose their health benefits due to any of the qualifying events mentioned above.
- Spouses of covered employees who lose their coverage due to a qualifying event, such as divorce or legal separation, or the employee becoming entitled to Medicare.
- Dependent children of covered employees who lose their coverage due to a qualifying event, such as aging out of dependent status, the death of the employee, or the employee becoming entitled to Medicare.
Conditions for Eligibility
COBRA coverage eligibility requires the following conditions to be met:
- The employer must offer a group health plan providing medical, dental, vision, and prescription drug coverage.
- Employees and their families must be notified of their COBRA rights within 14 days after the plan administrator is informed of a qualifying event. They then have 60 days to elect COBRA coverage.
- Beneficiaries must pay the required premiums on time. Coverage can be terminated if premiums are not paid within the grace period.
How Long Does COBRA Coverage Last in Texas?
Key COBRA Coverage Dates:
- Standard COBRA coverage is 18 months
- HMO participants can have COBRA coverage for up to 24 months
- Certified disabled individuals and dependents may have coverage for up to 29 months
In terms of Texas group health insurance, COBRA can last up to 18 months after employment ends. Various circumstances may alter that rate, however.
For example, employees are not allowed to sign up for another group’s health insurance, including vision or dental, or become eligible for Medicare.
Individuals who participate in a Health Maintenance Organization (HMO) plan are eligible for an additional 6 months of COBRA coverage after the initial COBRA eligibility.
Also, anyone who is disabled may continue COBRA coverage for up to 11 months after the initial COBRA period of 18 months.
Administration Concerns—Do You Need Help With COBRA?
Navigating COBRA can be complicated and overwhelming, especially for small-business owners. Fortunately, there are ways to ensure your company stays compliant and your employees are taken care of.
First, you can hire Third-Party Administrators (TPAs) to manage COBRA administration tasks.
Why this works:
- Allows employees to keep track of their COBRA benefits easily
- Provides employees a place to pay premiums and stay enrolled easily
- Ensures your company is fully compliant and in line with all COBRA regulations
Secondly, you can consider developing internal processes for managing COBRA notifications, enrollments, and premium collections.
Why this works:
- It sets your company up for compliance if and when an employee enrolls in COBRA coverage
- Keeps your previous employees safely enrolled in COBRA as long as they follow the process & requirements
Do you need help with COBRA for your group health plan in Texas?
If so, we can help. We offer TPA services for COBRA and so much more. Reach out to our helpful and experienced team to learn more about how we can help your business.
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