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COBRA Insurance and Small Business

Posted on: February 28th, 2012 by Cobra Insurance Guide

Stethoscope and PenAnyone running a small business knows the difficult nature of making health insurance decisions for your company and employees. Many times supplying health insurance to employees can be cost prohibitive, especially when the small business owner can use a spouse’s insurance themselves, and save both the cost and headache of finding a health insurance plan and bearing a significant part of the cost of the insurance for employees. However, in today’s economy it is important to know the impact of your health insurance decisions as a small business owner, specifically in regards to COBRA insurance and how your decisions will impact your employees.

Under the federal COBRA insurance law, employees are eligible for COBRA insurance if there are at least 20 people, or their part time equivalents, covered on the employer’s health plan. That means that with COBRA insurance the employee and their family will be able to continue to keep their health insurance for up to 18 months in most cases, if your company meets that federal mandate. As a small business owner, if your company has at least 20 employees on your health insurance plan, or their part time equivalents, then you are required by law to provide COBRA insurance paperwork to your employees and their family members should they be laid off, quit, or meet the other federal COBRA insurance qualifying conditions.

If you do not have 20 employees and therefore do not meet the federal COBRA insurance statute, that does not mean that you definitively do not have any COBRA insurance responsibilities. Many states have mini COBRA insurance laws that apply to companies with fewer than 20 employees, most often for companies with between 2-19 employees. In the case that you are a small business owner who offers health insurance, and you live in a state with a mini COBRA law, you will need to make sure that you provide the right COBRA insurance paperwork to any covered employees, and their families, should they be laid off, quit, or otherwise meet the state COBRA conditions.

In both cases, if you are required by law to provide COBRA insurance election forms to your employees, then you afford them the opportunity to continue to receive health insurance for 18 months in most cases. However, should they sign up for COBRA insurance, you will no longer be financially responsible for their health insurance any longer. With COBRA, the entire cost of the health insurance plus a 2% administration fee, will be passed onto the employee and they will work directly with the group health insurance plan for billing and questions. They will continue to have the exact same health insurance plan with the same coverage, prescriptions, doctors etc.

As an employer it is also important to know that any changes to the group health insurance plan that you make will affect any previous employees who are still using the health insurance plan with COBRA. If you change group health insurance companies, the previous employee will have an option to continue with any changes. Similarly, if you stop offering health insurance or close own completely, the employee will no longer be able to continue COBRA insurance coverage.

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