COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that requires employers to offer continuation coverage of group health insurance to employees who lose their job or experience a reduction in work hours. Navigating all the requirements can be cumbersome for a small business owner. That is where Chrissy Myers, CEO of AUI, and her team can help.
Today, COBRA coverage is a valuable benefit to employees. When going through a work transition, employees face laps in healthcare coverage. COBRA benefits are designed to ease the gap. Whether an employee leaves a company voluntarily or for other reasons, they can opt to stay insured through the company’s health plan for a limited period. Employees have up to 30 days to notify the plan administrator under law 29 U.S.C. S 1166(a). Then the plan administrator has 14 days to supply the employees with notifications of rights to continued coverage.
What is the Cost of COBRA for Employees and Employers?
How do you know what COBRA coverage will cost? COBRA premium paid by the employee + administrative fee. However, sometimes an employer may pick up a portion as part of a severance package. COBRA rates are calculated based on the full cost of the health insurance coverage, including both employer contributions as well as employee contributions. Then add a 2% administrative fee. The specific calculation may vary depending on the employer’s plan and the state in which the employee resides.
COBRA rates can be more expensive than what the employee and employer were paying while the employee was still employed. One reason is that the employer needs to contribute to the premium. The employee will now be responsible for the full cost of the premium plus the administrative fee.
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