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Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

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The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is a federal law that mandates employers to offer continued health insurance coverage to employees and their families when such coverage would otherwise be lost due to specific qualifying events. These events include termination of employment for reasons other than gross misconduct, reduction in work hours, divorce or legal separation, death of the covered employee, and other life changes that affect eligibility for benefitsUnder COBRA, eligible individuals can retain their existing group health insurance for a limited period, typically up to 18 months, though extensions may be available in certain circumstances. This continuation coverage ensures that individuals do not experience a gap in their health insurance during transitional periods, such as between jobs or following significant life events. However, beneficiaries are generally required to pay the full premium for coverage, which can be up to 102% of the cost to the employer, including administrative feesFor employers, COBRA applies to private-sector organizations with 20 or more employees, as well as to state and local governments. Compliance involves notifying eligible employees of their COBRA rights within specific timeframes after a qualifying event occurs. Failure to comply with COBRA requirements can result in substantial penalties and legal liabilitiesFrom a SHRM Certified Professional and employment law perspective, understanding COBRA is crucial for effectively managing employee benefits and ensuring legal compliance. HR professionals must be adept at navigating the complexities of COBRA, including timely notifications, accurate premium calculations, and managing enrollment processes. Additionally, they should be aware of state-specific regulations that may augment federal COBRA provisions, providing additional protections or different requirementsOverall, COBRA serves as a vital mechanism for safeguarding employees' access to health insurance during periods of transition, reflecting the broader objectives of employment law to protect workers' rights and promote stability in workforce management.

Guide to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Introduction
_The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)_ is a crucial federal law that affects both employers and employees by providing continuation of health insurance coverage under certain circumstances.

Why It Is Important
COBRA is important because it ensures that employees and their families do not lose their health insurance coverage due to specific qualifying events such as job loss, reduction in hours, or other life events.

What It Is
COBRA is a federal law that requires employers with 20 or more employees to offer continuation of group health insurance plans to eligible employees and their dependents for a limited period after a qualifying event.

How It Works
When a qualifying event occurs, COBRA allows eligible individuals to continue their existing health insurance coverage for up to 18 months (and in some cases longer). The individual typically pays the full premium, including the portion previously covered by the employer.

Exam Tips: Answering Questions on COBRA
Understand Key Provisions: Familiarize yourself with the eligibility criteria, qualifying events, duration of coverage, and the cost structure.
Use Case Scenarios: Practice applying COBRA rules to different scenarios to understand how the law functions in various situations.
Stay Updated: Be aware of any amendments or changes to COBRA that may affect its application.
Focus on Definitions: Clearly define terms like 'qualifying event,' 'eligible employee,' and 'continuation coverage' in your answers.
Organize Your Answers: Structure your responses logically, starting with defining COBRA, explaining its importance, how it operates, and then addressing the specific question.

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SHRM-CP - Employment Law Example Questions

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Question 1

Under COBRA, how soon must an employer notify an eligible employee about their continuation coverage rights following a qualifying event?

Correct Answer: Within 14 days after the qualifying event.

Within 14 days after the qualifying event. This is the correct timeframe for employers to notify eligible employees about their COBRA continuation coverage rights. Employers are required to provide this notice promptly to ensure employees are aware of their options following a qualifying event. The other options either do not provide sufficient time or do not align with COBRA's specified notification period.

Question 2

Under COBRA, how is the cost of continuation coverage calculated for eligible individuals?

Correct Answer: Eligible individuals must pay the full premium, including the employer’s share, plus a 2% administrative fee.

Under COBRA, eligible individuals are required to pay the full premium for continuation coverage, which includes both their own portion and the employer’s share, along with a 2% administrative fee. This ensures that individuals maintain their health coverage after leaving employment.

Question 3

After an employee experiences a qualifying termination event, what is the HR professional's responsibility under COBRA regulations?

Correct Answer: Provide the employee with a COBRA election notice within the required timeframe.

The HR professional must provide the employee with a COBRA election notice within the required timeframe, ensuring they are informed of their rights to continue health coverage. Automatically enrolling the employee in continuation coverage is incorrect because COBRA requires that employees be given the option to elect continuation coverage rather than being automatically enrolled. Informing the employee about COBRA rights only if they inquire is incorrect because employers are required to notify employees of their COBRA rights regardless of whether they ask. Offering an extension of the standard COBRA coverage period upon the employee's request is not a primary responsibility under COBRA regulations.

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