Consolidated Omnibus Budget Reconciliation Act: Overview, definition, and example
What is the Consolidated Omnibus Budget Reconciliation Act (COBRA)?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a U.S. federal law that provides individuals and their families the right to continue health insurance coverage under their employer's group health plan for a limited time after certain qualifying events. These events include job loss, reduction in work hours, transition between jobs, or other life events that would normally result in the loss of health benefits.
Why is the Consolidated Omnibus Budget Reconciliation Act important?
COBRA is important because it helps employees and their families avoid a gap in health insurance coverage when they experience life changes like job loss or a reduction in work hours. It allows people to continue their health coverage for up to 18 months (or longer in some cases), ensuring they don't lose access to vital health care during a transition period. This protection is particularly important for those who cannot afford to immediately purchase new insurance or are in between jobs.
Understanding the Consolidated Omnibus Budget Reconciliation Act through an example
If an employee is laid off from their job, they may lose their employer-sponsored health insurance. Under COBRA, the employee can choose to continue the same health insurance coverage for themselves and their dependents by paying the full premium (including the employer’s contribution) for a specified period, usually up to 18 months. This allows the employee to maintain health insurance until they find new employment or obtain other coverage.
Example of a Consolidated Omnibus Budget Reconciliation Act clause
Here’s how a COBRA clause may appear in an employee benefits agreement:
"In the event of termination of employment, reduction in work hours, or other qualifying events, the Employee and their eligible dependents will be offered the opportunity to continue health insurance coverage under the Employer’s group health plan pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA) at the Employee's expense for a period of up to 18 months."
Conclusion
COBRA provides essential health insurance continuation for employees and their families during periods of transition. It helps ensure that individuals do not lose access to health coverage due to unexpected life events like job loss or a change in work hours. Businesses must comply with COBRA requirements and inform eligible employees of their rights to continue coverage under the law.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.