This information is a summary of COBRA regulations and should not be construed as legal advice or any other form of professional advice. Your legal counsel is the best source of information regarding your obligations under COBRA.
Who must comply with COBRA?
Employers (with the exception of “church” and “governmental” organizations) who maintain a group health insurance plan and employ 20 or more full- and/or part-time employees during 50% of the business days in the preceding calendar year are obligated to comply with federal COBRA regulations.
What plans are subject to COBRA?
COBRA applies to ‘group health plans’, the definition of which includes: Medical, Dental, Vision, and Prescription Drug plans, Medical Flexible Spending Accounts and/or Health Reimbursement Arrangements, Employee Assistance Programs, Employer-Maintained Treatment Programs/Clinics, and Wellness Programs.
How and when should an employer notify its employees of their COBRA Rights?
First, an employer or its Plan Administrator must notify all current and future group health plan enrollees and their covered spouses of all of their rights under COBRA within 90 days of commencing coverage under the employer’s group health plan. Separate notices must be sent if the employee and his/her spouse maintain separate residences or if the spouse enrolls more than 90 days after the covered employee.
Second, the Plan Administrator must notify all qualified beneficiaries of their COBRA election rights within 14 days of being informed of a qualifying event (employers acting as the Plan Administrator have 44 days to provide a COBRA Election Notice). Qualifying Events are events that involve loss of coverage due to:
- Termination of a covered employee’s employment for any reason other than gross misconduct;
- A reduction in hours of a covered employee including lay-off and non-FMLA leaves of absence;
- Death of the employee;
- Divorce or legal separation;
- A dependent child ceasing to meet plan eligibility requirements;
- Dependent coverage lost due to an active employee becoming entitled to Medicare;
- A retiree, spouse or child of a retiree loses coverage within one year before or after commencement of bankruptcy proceedings (provided the employer offers group health insurance for retirees).
Who is a “Qualified Beneficiary?"
In order to be a considered a “Qualified Beneficiary”, the individual must satisfy the following conditions:
- the individual, his/her spouse and/or dependent(s) must have coverage under the applicable plan; and
- the individual must have coverage under the applicable plan immediately before the qualifying event.
What type of coverage must be offered following a Qualifying Event?
COBRA coverage must be identical to the coverage provided to similarly-situated beneficiaries under the plan(s) under which the qualified beneficiary was covered just before the qualifying event. Qualified beneficiaries may change their COBRA coverage at the applicable plan’s open enrollment and also if they experience events described under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). In addition, if coverage for active employees changes, the COBRA coverage for similarly-situated qualified beneficiaries must also change.
How long does COBRA coverage last?
The length of COBRA continuation coverage depends on the type of qualifying event. For example, termination of employment/reduction of hours results in an 18-month maximum coverage period while death of the employee, divorce/legal separation, loss of dependent status, and Medicare entitlement (of an active employee) results in a 36-month maximum coverage period.
- The 18-month coverage period may be extended to 36 months if during the 18-month coverage period, a loss of coverage results from the death of the covered employee, a divorce/legal separation, or the covered individual’s dependent ceases to qualify as a dependent under the group plan.
- The 18-month coverage period may be extended to 29 months if the qualified beneficiary is disabled (as determined by the Social Security Administration).
- An extension is measured from the date that the original 18-month period began; it does NOT begin as of the date of the secondary qualifying event.
- If a covered individual becomes entitled to Medicare in the 18 months preceding termination/reduction in hours, the maximum coverage period for the spouse and dependent children ends 36 months after the covered individual became entitled to Medicare.
Can an employer terminate a COBRA continuant’s coverage prior to the end of the required coverage period?
Yes, if any of the following events occur:
- The required premium is not paid on time (certain grace periods apply);
- The qualified beneficiary becomes entitled to Medicare;
- The qualified beneficiary becomes covered under another group health plan (certain conditions apply);
- The employer ceases to offer any group health plan for employees;
- The coverage period has been extended due to disability and the qualified beneficiary is determined not to be disabled;
- For “cause” (e.g., if the plan could terminate an active employee’s coverage for filing a false claim, then COBRA coverage could be terminated for the same reason).
How much can an employer charge per month for COBRA coverage?
A plan may (but is not required to) charge up to 102% of the applicable premium. The COBRA premium charged during a disability extension period may be up to 150% of the applicable premium.
Does a domestic partner have the same rights as a spouse under COBRA?
No. A domestic partner is not considered a qualified beneficiary and does not have independent COBRA election rights even if covered under the plan on the day before the qualifying event. On the other hand, a domestic partner’s child who is covered under the plan on the day before a qualifying event is considered a COBRA qualified beneficiary.
What is the “anticipation of divorce rule”?
This scenario applies when an employee drops coverage before a divorce is final (e.g., during open enrollment in anticipation of an upcoming divorce). Coverage may have ended prior to the divorce, but the spouse is entitled to the full 36 months of COBRA coverage when the divorce is final. COBRA coverage would begin as of the date of the divorce and would result in the spouse having a gap in coverage between the time coverage was dropped and the actual divorce.