Cantrell Zwetsch attorneys frequently negotiate improved COBRA benefits as part of a package of severance benefits or as benefits in executive employment agreements. We also advise and counsel clients concerning their entitlement to COBRA and other separation benefits.
A federal statute known by its initials, COBRA allows most former employees to remain covered under an employer’s health insurance plan, but they will usually have to pay more for it than they did while employed. Under COBRA the former employee is responsible for the entire premium for her health insurance, including both the portion of the premium that she paid during her employment and any portion that her employer paid. For example, if during her employment an employee paid $250 per month and her employer paid $300 per month for her health insurance, under COBRA the employee would pay $550 per month for her health insurance and her former employer would pay nothing. The former employee will probably also have to pay an extra 2% of her premium as an administrative fee.
COBRA is not mandatory for the employee; in fact, an employee does not have COBRA coverage unless she actively signs up for it. Employers and insurance plan administrators are required to provide a departing employee with documents about COBRA within 44 days of the end of an employee’s employment; then the former employee generally has up to 60 days to decide whether she wants COBRA coverage. COBRA coverage generally lasts for up to 18 months; after that, the former employee will no longer be eligible for her ex-employer’s health plan.
A claim may arise under COBRA when a former employee cannot obtain COBRA benefits because the former employer or plan administrator does not send the necessary documents within 44 days or does not make the same benefits available to COBRA recipients that are available to current employees, among other violations. Issues regarding the right to COBRA benefits may also arise in the context of separation and termination agreements. In addition, if an employee has been terminated as part of a mass layoff or company shutdown, her right to the value of lost health insurance benefits may be protected by the WARN Act.