Maryland Life and Health Insurance License Practice Exam

Under COBRA, what is true about a terminated employee’s benefits?

1. Must include reduced premiums

2. Can change based on new employment

3. Must remain the same and premiums cannot exceed 102%

4. Are eliminated immediately

The correct answer is: Must remain the same and premiums cannot exceed 102%

The correct answer highlights an important component of the Consolidated Omnibus Budget Reconciliation Act (COBRA), which ensures that employees who have lost their jobs can continue to receive health insurance benefits. Under COBRA, when an employee is terminated, their health insurance benefits must remain the same as they were prior to their employment termination. This means that the coverage continues without changes to the plan itself, thus allowing the terminated employee to keep the same benefits they had while employed. In regard to premiums, the Act states that while the employee is responsible for paying their premiums, these costs cannot exceed 102% of the premium rate. This allows for a slight increase to account for administrative costs but ensures that the former employee is not priced out of maintaining their health insurance coverage. It's crucial to understand that under COBRA, benefits are not eliminated immediately, ensuring individuals have a safety net during their transition after job loss. While changes can occur due to new employment, this specific framework ensures continuity of benefits rather than alterations as a result of changing jobs or other circumstances.