Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Under the Consolidated Omnibus Budget Reconciliation Act of 1985, better known as COBRA, if an employee terminates employment with the company, the employee is entitled to continue participating in the company’s group health plan for a prescribed period of time, usually 18 months. (In certain circumstances, such an employee’s divorce or death, the length of coverage period may be longer for qualified dependents). COBRA coverage is not extended to employees terminated for gross misconduct.

If a former employee chooses to continue group benefits under COBRA, he/she must pay the total applicable premium plus a 2% administrative fee. Coverage will cease if the former employee fails to make premium payments as scheduled, becomes covered by another group plan that does not exclude pre-existing conditions, or become eligible for Medicare.

Source: Society for Human Resource Management