Job Loss or Change in Working Conditions
Employees who lose their jobs owing to voluntary resignations, involuntary terminations, lay offs, or retirements become eligible to opt for COBRA mandated continued coverage for 18 months from the time they lose their jobs. The employee’s spouse and dependent children also become eligible to opt for such continued coverage.
At times, change in working conditions such as a reduction in number of working hours may change the status of employees from full-time to part-time or temporary workers, taking them outside the purview of the company’s group health insurance scheme. Such employees and their dependents also become eligible for COBRA.
Not all employees who lose their jobs, however, become eligible for COBRA. Employees dismissed for gross misconduct, and their dependents become ineligible for COBRA. The act does not define “gross misconduct" and leaves it to the company to decide what constitutes “gross misconduct." The employee may challenge the definition in court, and this creates a gray area in an otherwise clear-cut act. Employers would do well to define “gross misconduct" in their company policies and employee handbook, have documentary evidence to prove that the employee did indulge in such gross misconduct, and ensure that such gross misconduct was the primary reason for termination.
When companies go bankrupt, it usually defaults on the group health insurance policy premiums. Since this in effect means discontinuation of the scheme, employees and their dependents become ineligible for COBRA.
The eligibility requirements for mini-COBRA, applicable in some states in companies employing less than 20 employees, are the same, except that the employees or their dependents can opt for continued coverage for only 9 months instead of the usual 18 months.