How COBRA Insurance Works in Utah

Did you know that, in specific circumstances, employees continue to receive group health insurance coverage after losing their jobs? The Consolidated Omnibus Budget Reconciliation Act — COBRA, for short — is one of the most important pieces of health insurance legislation that impacts your organization. Both state and federal laws determine the requirements for COBRA here in Utah, which makes it a difficult process to understand. This guide helps to clear up the confusion about COBRA insurance in Utah.

In this guide, you will learn the following:

• Why you need to comply with COBRA legislation as a Utah business owner.
• The differences between federal and Utah COBRA legislation.
• The specific rules/regulations at the federal and state levels.
• Whether employees’ spouses/dependents qualify for employer-sponsored health insurance.

What is COBRA insurance?

COBRA is a law passed by Congress during the Reagan administration. In the simplest of terms, COBRA stipulates the following:

A person (and his/her dependents) can continue to receive employer-sponsored health insurance after the employee leaves a company or loses his/her job.

Although this is the fundamental principle of COBRA insurance, there are differences between how the federal and Utah governments mandate this legislation.

On the federal level, the following rules apply:

• Employers with 20 or more full-time (or full-time-equivalent) employees must offer COBRA to these employees.
• Health coverage from COBRA ranges from 18-36 months, depending on the specific circumstances.

Many businesses think they need to continue to pay the insurance premiums for employees who have left or lost their job, but this isn’t the case. COBRA doesn’t require employers to pay anything.
Simply put, employers must offer COBRA to employees so they can continue to receive group insurance benefits. Employees will need to cover the cost.

There’s another federal rule you need to know:

• Employers with 20 or more full-time (or full-time equivalent) employees must offer COBRA to these employees’ spouses/dependents as well. Again, employees’ spouses/dependents need to cover the cost of COBRA. As a business owner, you don’t need to pay anything.

COBRA premiums are equal to the total cost of the premium under your employer-sponsored health insurance, plus a 2% administration charge.

COBRA Insurance in Utah

Utah has a separate COBRA law, COBRA continuation coverage, that mandates additional provisions to the ones above:

• Under federal law, employers with 20 or more full-time (or full-time-equivalent) employees must offer COBRA to their employees and their spouses/dependents.
• Under Utah law, employers with less than 20 full-time (or full-time equivalent) employees can offer COBRA to these employees and their spouses/dependents.
• Under federal law, employers with 20 or more full-time (or full-time-equivalent) employees must offer COBRA coverage ranging from 18-36 months, depending on the specific circumstances.
• Under Utah law, employers with less than 20 employees must offer health, dental and vision coverage from COBRA lasting up to 12 months, depending on the specific circumstances.

As a business owner in Utah, it’s important to understand these distinctions for compliance purposes.

What are the rules for employees?

The rules in this section apply to both federal and Utah COBRA insurance recipients (except where stated).

COBRA Qualifications

• An employee must be enrolled in your group plan on the day before the event that caused the employee to lose his/her access to the plan. (Under Utah law, an employee must be enrolled in your group plan for 3 months before the event that caused the employee to lose his/her access to the plan.)
• The group plan must have been effective for more than 50 percent of business days in the previous calendar year.
• If the total number of employees in an organization drops to fewer than 20, the employee is not eligible.
• If the employer goes out of business, the employee is not eligible.
• The employer must give the employee at least 60 days to choose whether to receive COBRA benefits.
• The employee can change his/her mind about receiving these benefits in the 60 days after the event that caused the employee to lose his/her access to the plan.

Various events might cause an employee to lose his/her access to your group plan. These “qualifying events” include:

• The employer terminated the employee’s contract.
• The employer fired the employee.
• The employee left the company.
• The employee decreased the number of hours he/she works.
• The employee has retired.
• The employee has taken a leave of absence.
• The employee has been suspended.

Note: Employees will not qualify for COBRA if fired for gross misconduct.

COBRA Termination

Employees can have their COBRA coverage terminated in the following circumstances:

• The employee didn’t pay premiums on time.
• The employee receives coverage under another group plan. For example, the employee receives health insurance under his/her new job.
• The employee moves out of the health insurer’s service area.
• The employee commits a fraud connected to the group plan.
• The employer stops maintaining a group health plan.

COBRA is not always the most financially viable option for your employees. The cost of paying the full price of their insurance premium, plus the admin fee, can often be too much for someone that is out of work. If they choose not to start COBRA coverage or their COBRA reaches the end of its term, they may be eligible for an individual plan and tax credit through the Health Insurance Marketplace (healthcare.gov). To find out more about this alternative, reach out to Altura Benefits today!

What are the rules for employees’ spouses/dependents?

To qualify for COBRA, spouses and dependents must have been covered by the employee’s group health plan on the day before a “qualifying event.” Qualified beneficiaries will have days during which each beneficiary may choose COBRA coverage.

An employee’s spouse or dependent is subject to the same rules as the employee, in addition to the conditions below.

An employee’s spouse/dependent forfeits their rights to COBRA if…

• The covered employee receives Medicare.
• The covered employee divorces or separates from the beneficiary.
• The covered employee dies.

Final word

When it comes to COBRA insurance in Utah, there are many rules and regulations you must adhere to. However, non-compliance could jeopardize your business and result in penalties. Altura Benefits is the perfect solution, optimizing HR responsibilities and providing employees with the support they require.

Click here to learn more about Altura Benefit’s employee benefits solution.