Federal COBRA law requires most private employers to continue to make existing group health insurance available to workers who are discharged or resign from employment. All employees who are discharged as a result of voluntary or involuntary termination, such as for poor performance, negligence, or inefficiency (with the exception of those who are fired for gross misconduct), may elect to continue plan benefits currently in effect at their own cost provided the employee or beneficiary makes an initial payment within 30 days of notification and is not covered under Medicare or any other group health plan. The law also applies to qualified beneficiaries who were covered by the employer's group health plan the day before the discharge. Thus, for example, if the employee chooses not to continue such coverage, her spouse and dependent children may elect continued coverage at their own expense.

The extended coverage period is 18 months upon termination of the covered employee; upon the death, divorce, or legal separation of the covered employee, the benefit coverage period is 36 months to spouses and dependents.

The law requires that employers or plan administrators separately notify all employees and covered spouses and dependents of their rights to continued coverage. After receiving such notification, the individual has 60 days to elect to continue coverage. Additionally, employees and dependents whose insurance is protected under COBRA must be provided with any conversion privilege otherwise available in the plan (if such coverage exists) within a six-month period preceding the date on which coverage would terminate at the end of the continuation period.

Some employers run afoul of the law in failing to follow rules regarding notification requirements, conversion privileges, excluded individuals, and time restrictions. In the event the employer fails to offer such coverage, the law imposes penalties ranging from $100 to $200 per day for each day the employee is not covered and other damages.

Counsel Comments:Cases typically pit a former employee or an employee's dependent with substantial medical expenses against the employer or an insurance company. Courts are sometimes willing to interpret and apply COBRA with a view toward extending coverage wherever possible. For example, in one case, an employee incapacitated by a series of strokes was maintained on her employer's group insurance policy. After about a year, the employee was taken off the company's rolls. At that time she was in a coma, and the COBRA continuation notice was sent to her husband. Misunderstanding the intent of the offer and thinking that his wife was still covered under the employer's group plan without premium payments, he waived his wife's insurance continuation rights. Later, as legal guardian, the ex-employee's husband tried to regain the option of COBRA coverage, but the insurance company refused. The husband sued and won; the court ruled that the employer should have included the Summary Plan Description with the COBRA notice sent to the husband and that without the summary he was unable to make an informed decision.

Tip:Know your COBRA rights before accepting any job and in the event you resign or are fired. This is especially true if you or a spouse or dependent is sick and needs the insurance benefits to pay necessary medical bills. You are entitled to such protection even if you have worked for the employer for a short period of time. Most short-term employees can generally enjoy COBRA protection for periods exceeding the length of their employment. The only requirement is that you must have been included in the employer's group plan at the time of the firing and that the employer was large enough (i.e., employed 20 or more workers, including part-timers, independent contractors, and agents, during the preceding year) under federal law to qualify.

You cannot obtain benefits if you are fired for gross misconduct. This term is relatively ambiguous; the burden of proof is on the employer to prove that the discharge was for a compelling reason (such as starting a fight or stealing).

If an employer reduces your working hours to a point that makes you ineligible for group health coverage, refuses to negotiate continued health benefits as part of a severance package, or fails to notify you of the existence of such benefits, contact the personnel office immediately to protect your rights. If the employer refuses to offer continued COBRA benefits after a discharge for any reason, consult an experienced employment lawyer immediately.