![]() In particular, such an arrangement could be considered discriminatory under the Internal Revenue Code if the health plan is self-insured and the subsidy is not broadly offered. ![]() Generally yes, although employers who engage in this practice should proceed with caution. May I pay for a terminated employee’s COBRA coverage (in full or in part)? Although many employers do subsidize COBRA, especially as part of a severance package, this is not required.Ģ. The 102% represents the total premium (employee’s share plus the employer’s share) plus a 2% administrative fee. An employer can require an electing employee to pay up to 102% of the cost of the medical coverage in order to continue coverage under COBRA. Must I pay for a terminated employee’s COBRA coverage? Here are some of the more common questions we receive from our employer clients.ġ. Not surprisingly, however, the COBRA rules are complex, and we frequently field questions from employers who are facing employee terminations and just want to get things right. Although not the focus of this post, the 18-month period may be extended to 29 months in the event of a disability, and spouses and dependents have additional COBRA rights to elect up to 36 months of coverage due to certain other qualifying events including divorce or the employee’s death. In general, employees (and their spouses and dependents) who lose coverage under an employer’s health plan due to termination of employment or reduction of hours are entitled to continue that coverage for up to 18 months. Most employers are no strangers to the basic requirements of COBRA. Others simply prefer the devil they know – after all, why risk buying a new plan which may not cover needed services and preferred doctors, or might have terrible service? Moreover, some individuals are offered subsidized COBRA as part of a severance package, or are courted by a new employer who is willing to pay COBRA premiums for coverage under the former employer’s plan. Some do not want the hassle of purchasing marketplace coverage, or see few appealing marketplace choices. There are many reasons terminated employees are choosing COBRA over other insurance options. Why would anyone continue to choose expensive COBRA continuation coverage? And yet, COBRA seems as strong as ever. The ACA’s exchanges seemed poised to offer affordable, sometimes subsidized, health care options. When the Affordable Care Act (ACA) was signed some nine years ago, many employers wondered what would become of COBRA (aka, the continuation coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985).
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