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The Consolidated Omnibus Budget Reconciliation Act (COBRA) is intended to ensure that employees and their dependents can maintain their group healthcare coverage following certain events that otherwise would result in termination of coverage. COBRA’s protections are temporary and are intended as a stopgap until insurance is obtained from another source, such as a new employer. Employers do not have to pay for any portion of the premiums for COBRA coverage, but the beneficiaries get to maintain their insurance at less expensive group rates.
COBRA requires group health plans sponsored by covered employers to allow qualified beneficiaries to have "COBRA continuation coverage" in the event that they lose group health plan coverage for specified reasons. COBRA applies only to employers who had 20 or more employees on more than 50 percent of typical business days during the prior calendar year. In some situations, insured employees have continuation rights under both federal and state law. In such cases, employees may choose the more favorable law. Under both federal and almost all state laws, continuation requires the insured to pay the full premium (including the former employer's share), but the insured does get the advantage of cheaper group rates.
Federal COBRA continuation does not apply to any employer-sponsored group health plan if the employer normally employed fewer than 20 employees during the prior calendar year. An employer is considered to have normally employed fewer than 20 employees during a particular calendar year if it had fewer than 20 employees on at least 50 percent of its typical business days during that year. When counting employees for this purpose, only “common-law employees” are counted. Thus, self-employed individuals, independent contractors, and directors are not counted. Employees of all members of a controlled group are counted, including employees of a foreign member of the controlled group. Part-time employees are also counted as a fractional equivalent of a full-time employee. The fractional equivalent is calculated by dividing the hours that the part-time employee works per week by the number of hours that an employee must work in order to be considered a full-time employee.
Covered employees. A “covered employee” is an individual who is eligible to be covered under a group health plan by virtue of the performance of services for the employer maintaining the plan or membership in the employee organization maintaining the plan. Self-employed individuals, independent contractors (and their employees), and corporate directors are considered to be “covered employees” if their relationship to the employer maintaining the plan makes them eligible to be covered under the plan.
Qualified beneficiaries. A "qualified beneficiary" is an individual who, on the day before a “qualifying event,” is covered by a group health plan maintained by an employer. The individual can be a covered employee, the spouse of a covered employee, or a dependent child of the covered employee. A special rule allows a child who is born to or placed for adoption with a covered employee during a period of COBRA continuation coverage to be a qualified beneficiary.
Group health plan. A group health plan for purposes of COBRA is defined as an employee benefit plan providing “medical care” to participants or beneficiaries directly or through insurance, reimbursement, or otherwise. Coverage may be provided through insurance, an on-site facility, or be self-funding. This definition is quite broad and includes plans that are both contributory and noncontributory. However, specifically excluded from coverage are plans where substantially all the benefits are for qualified long-term care services.
Medical care. Medical care includes the diagnosis, cure, medication, treatment, or prevention of disease, or any other undertaking for the purpose of affecting any structure or function of the body. It also includes transportation that is essential to such health care. On the other hand, medical care does not include benefits that are merely beneficial to the general health of an individual, such as a vacation.
Qualifying events. Qualifying events are the events whose occurrence entitle an individual to COBRA continuation coverage if the event causes loss of coverage.
COBRA continuation coverage is an extension of the coverage that the qualified beneficiary had immediately before the qualifying event. The plan sponsor must provide an opportunity for qualified beneficiaries of a plan to continue coverage if they would lose coverage as a result of a qualifying event. COBRA continuation coverage must be the same as the coverage provided to similarly situated beneficiaries with respect to whom a qualifying event has not occurred. Modifications to the plan will apply to qualified beneficiaries if such modifications apply to similarly situated beneficiaries for whom a qualifying event has not occurred.
The length of time an insured must be allowed to continue coverage depends upon the qualifying event, i.e., the reason the individual has lost group coverage. In cases where an employer is covered by both state and federal law, the law more favorable to the employee applies. For specific state-law continuation rights,
The following events qualify an individual for COBRA continuation coverage if the event causes loss of coverage for a qualified beneficiary:
• Termination or reduction of hours of a covered employee (other than because of the employee’s gross misconduct);
• Death of a covered employee;
• Divorce or legal separation;
• The covered employee becomes entitled to Medicare benefits;
• “Aging out” of a child, (i.e., he or she ceases to be a dependent child under the age requirements of the plan); and
• Bankruptcy of the employer from which the covered employee retired.
Termination for gross misconduct is not a qualifying event, and COBRA continuation coverage does not have to be offered to an employee terminated for gross misconduct and his or her spouse and dependent children. The term “gross misconduct” is not defined either in the statute or in the regulations, and no standard has been consistently articulated or applied by courts or regulators. Accordingly, any decision to deny COBRA coverage based on an employee’s gross misconduct should be reviewed by an attorney.
In general, benefits under COBRA continuation coverage begin on the date of the qualifying event. Thus, the beginning date for calculating how long the benefits last is usually the date of the qualifying event. COBRA continuation rights are generally limited to either 18 or 36 months (with the exception of bankruptcy as the qualifying event).
18 months. A qualified beneficiary is entitled to continue coverage under COBRA for a maximum period of 18 months if coverage would otherwise end due to:
• Termination of employment; or
• Reduction of hours.
36 months. A qualified beneficiary who is a spouse or dependent child is entitled to continue coverage under COBRA for a maximum period of 36 months if coverage would otherwise end due to:
• Death of the covered employee;
• Divorce or legal separation from the covered employee;
• Entitlement of the covered employee for Medicare benefits; or
• Disqualification of a child as a dependent because of age.
Second qualifying events. If a qualified beneficiary is otherwise entitled to a maximum of 18 months of continuation coverage, the qualified beneficiary may become entitled to an additional 18-month extension (giving a total maximum period of 36 months of continuation coverage) if the qualified beneficiary experiences certain second qualifying events. Such events include:
• The death of a covered employee;
• The divorce or legal separation of a covered employee;
• A covered employee becomes entitled to Medicare; and
• A loss of dependent child status under the plan.
However, the second event can be a second qualifying event only if it would have caused the qualified beneficiary to lose coverage under the plan in the absence of the first qualifying event.
Lifetime of retiree. A qualified beneficiary who is a retired employee and his or her spouse and dependent children are allowed to continue coverage for the retiree's lifetime if coverage would otherwise end due to a bankruptcy proceeding plus an additional 36 months for a surviving spouse and dependent children.
Qualified beneficiaries become eligible for a disability extension of 11 additional months (to a total of 29 months) if any of the individuals who lost coverage because of the same qualifying event is determined to be disabled for Social Security purposes during the first 60 days following the qualifying event. Thus, the employee, his or her spouse, and any dependents who were covered prior to the employee losing his or her job or having a reduction in hours are all separately entitled to the extension if any one of them meets the disability criteria.
The disabled qualified beneficiary (or another person on his or her behalf) must also notify the plan of the disability determination before the end of the 18-month period following the qualifying event (i.e., the covered employee's termination of employment or reduction of hours). The plan can set a time limit for providing this notice of disability, but the time limit cannot be shorter than 60 days, starting from the latest of:
• The date on which the Social Security Administration (SSA) issues the disability determination;
• The date on which the qualifying event occurs;
• The date on which the qualified beneficiary loses (or would lose) coverage under the plan as a result of the qualifying event; or
• The date on which the qualified beneficiary is informed, through the furnishing of the summary plan document or the COBRA general notice, of the responsibility to notify the plan and the procedures for doing so.
The right to the disability extension may be terminated if the SSA determines that the disabled qualified beneficiary is no longer disabled. The plan can require qualified beneficiaries receiving the disability extension to notify it if the SSA makes such a determination, although the plan must give the qualified beneficiaries at least 30 days after the SSA determination to give such notice.
A child born or placed for adoption during the COBRA period is a qualified beneficiary. Thus, COBRA participants must be allowed to change their coverage status upon the birth or adoption of a child so that the child is covered for the balance of the continuation period. The length of the child's COBRA coverage is measured from the date of the original qualifying event.
A COBRA beneficiary must be given the same open enrollment period rights as similarly situated active employees covered by the plan, including the right to switch to another plan, another benefit package, or to add or eliminate coverage of family members.
A qualified beneficiary receiving COBRA coverage has the same special enrollment and open enrollment rights to add coverage for family members as do similarly situated active employees covered by the plan. Children born to or adopted by a qualified beneficiary are qualified beneficiaries, and COBRA coverage may be elected for them. New spouses may be added during special enrollment periods. Spouses and dependents may also be added to coverage during open enrollment periods if the plan allows active employees to do so. New spouses added during special enrollment periods and spouses and dependents added during an open enrollment period are not qualified beneficiaries and are not eligible for extended coverage if the qualified beneficiary experiences a second qualifying event.
Continuees may be charged no more than 102 percent of the group rate. For self-insured plans, the charge may be based on actuarial estimates, or in certain cases on the previous year's costs, adjusted for inflation. Premiums from continuees are “timely” if received within 30 days of the due date (or the time allowed by the insurer, if longer).
The right to COBRA continuation of coverage can be cut off prematurely if:
• The covered individual fails to pay the premiums in a timely manner;
• The beneficiary (former employee, spouse, or dependent) after electing COBRA becomes covered under another group health plan, through remarriage, or for another reason;
• The employer terminates its group health plan for all of its employees;
• The beneficiary, after electing COBRA, becomes entitled to Medicare benefits; or
• A qualified beneficiary engages in conduct that would justify the plan in terminating coverage of a similarly situated participant or beneficiary not receiving continuation coverage (e.g., fraud).
Department of Labor (DOL) regulations clarify the various COBRA notice requirements (29 CFR 2590.606-1et seq.). The regulations cover the following:
• The general notice of COBRA rights that is provided to participants and spouses;
• The qualifying event notices employers must provide to plan administrators;
• The notice employees and family members must provide to plan administrators;
• The election notice that plan administrators must provide to qualified beneficiaries;
• The notice plan administrators must provide to individuals requesting COBRA coverage when the coverage is unavailable; and
• The notice plan administrators must provide to qualified beneficiaries when COBRA coverage is terminated before the individual's maximum coverage period ends.
The General Notice of COBRA Rights provides basic information about COBRA. It must be provided to covered employees and spouses by the latter of 90 days after plan coverage begins or 90 days after the plan first becomes subject to COBRA. Including the required information in the summary plan description (SPD), which must be distributed by the same deadline, can also satisfy the requirement. But note, the SPD only has to go to the covered employee, not to the spouse.
If “on the basis of the most recent information available to the plan” a married couple resides at the same address, one notice addressed to both can be used. If the employee and spouse enroll at different times, a separate notice must be sent to each. There is no requirement to furnish a general notice to dependent children. The regulation lists the required contents and includes a model notice that may be used and, when appropriately modified and supplemented, will be deemed to satisfy the content requirement.
Contents of the general notice. The general notice must be written so it can be understood by the average plan participant and must contain the following information:
• The name of the plan and the name, address, and telephone number of a party or parties from whom additional information about the plan and continuation coverage can be obtained;
• A general description of the continuation coverage under the plan, including identification of the classes of individuals who may become qualified beneficiaries; the types of qualifying events that may give rise to the right to continuation coverage; the obligation of the employer to notify the plan administrator of the occurrence of certain qualifying events; the maximum period for which continuation coverage may be available; when and under what circumstances continuation coverage may be extended beyond the applicable maximum period; and the plan's requirements applicable to the payment of premiums for continuation coverage;
• An explanation of the requirement that a qualified beneficiary notify the plan administrator of a qualifying event that is a divorce, legal separation, or a child's ceasing to be a dependent under the terms of the plan and the plan's procedures for providing this notice;
• An explanation of the requirement that a qualified beneficiary provide notice to the plan administrator of a determination by the Social Security Administration that a qualified beneficiary is disabled and a description of the plan's procedures for providing this notice;
• An explanation of the importance of keeping the plan administrator informed of the current addresses of all participants or beneficiaries under the plan; and
• A statement that the notice does not fully describe continuation coverage or other rights under the plan and that more complete information regarding such rights is available from the plan administrator and in the plan's SPD.
A model general notice may be obtained at http://www.dol.gov/ebsa/COBRA.html.
Delivery of the general notice. Plan administrators are to deliver the general notice by means reasonably calculated to ensure actual receipt of the material by plan participants and beneficiaries. The notice must be sent by a method or methods likely to result in full distribution. In-hand delivery to an employee at his or her worksite is acceptable, but merely placing copies of the material in a location frequented by participants is never okay. It is also acceptable to include the notice as a special insert in a periodical distributed to employees, such as a union newspaper or a company publication, if the distribution list for the periodical is comprehensive and up to date. Also, a prominent notice on the front page of the periodical should advise readers that the issue contains a notice about rights under the plan and the law that should be read and retained for future reference.
The notice may be distributed through the mail by first, second, or third class. However, distribution by second- or third-class mail is acceptable only if return and forwarding postage is guaranteed and address correction is requested. Any material sent by second- or third-class mail that is returned with an address correction must be sent again by first-class mail or personally delivered to the participant at his or her worksite.
Electronic distribution. Electronic media may be used for the general notice in accordance with the procedures established by the DOL for other benefit plan disclosures Please see the national Benefits Recordkeeping and Disclosures section. .
Substituting the election notice for the general notice. It is possible that a plan administer may be required to provide an election notice before the time limit for providing the general notice has expired. In such a case, DOL says that it will be sufficient to provide the election notice only.
Employer's qualifying event notice to plan administrator. Employers must notify plan administrators of qualifying events, including terminations of employment, reductions in hours, death of the employee, bankruptcy of the employer, or the employee's Medicare entitlement, within 30 days of the event (29 C.F.R. Sec. 2590.606-2).
Employee or family member notice to plan administrator. Employees or their family member must notify the plan administrator of qualifying events such as divorce or legal separation and loss of dependent status (including when these are second qualifying events) and of a qualified beneficiary's disability or cessation of disability (29 C.F.R. Sec. 2590.606-3). Plans must establish a reasonable procedure for furnishing these notices. A plan's procedure generally will be deemed reasonable if it is described in the plan's SPD, specifies who is designated to receive notices, specifies how qualified beneficiaries must give the notice, and lists the required content of the notice. If a plan does not have reasonable procedures, notice will be deemed to have been provided if information adequately identifying a specific qualifying event is communicated to any of the parties that would customarily be considered in charge of the plan. A specific notice form may be required.
Warning: A plan without a reasonable procedure will have to accept written and oral notices that identify a qualifying event and are made in a way that is reasonably calculated to bring the information to the attention of either the organizational unit that customarily handles benefit matters or any officer of the employer. This means an oral notice to anyone with authority or responsibility for health benefits may be satisfy the requirement.
A plan may not reject an incomplete notice as untimely if the notice is provided within the plan's time limits and contains enough information to enable the plan administrator to identify the plan, the covered employee, qualified beneficiaries, the qualifying event or disability determination, and the date on which it occurred. The plan administrator can require qualified beneficiaries to supply the missing information.
The period for providing a notice of a qualifying event must run to at least 60 days following the qualifying event. If the plan provides that COBRA begins when coverage is actually lost, the 60 days begin then.
The notice that plan administrators provide to qualified beneficiaries must be in writing and must be provided within 14 days after receipt of a notice of a qualifying event from the employer or from the employee or family member (29 C.F.R. Sec. 2590.606-4). In cases where the employer is the plan administrator, this notice is due within 44 days of the event or loss of coverage (whichever applies). This notice must include the following information:
• The name of the plan and the name, address, and telephone number of the party responsible for the administration of continuation coverage benefits;
• Identification of the qualifying event;
• Identification, by status or name, of the qualified beneficiaries who are entitled to elect continuation coverage and the date on which coverage under the plan will terminate (or has terminated) unless continuation coverage is elected;
• A statement that each individual qualified beneficiary has an independent right to elect continuation coverage, that a covered employee or a qualified beneficiary who is the employee's spouse may elect continuation coverage on behalf of all other qualified beneficiaries, or that a parent or legal guardian may elect continuation coverage on behalf of a minor child;
• An explanation of the plan's procedures for electing continuation coverage, including an explanation of the time limits;
• An explanation of the consequences of failing to elect or waiving continuation coverage, including how such a decision will affect the future rights to group health coverage free of preexisting condition limitations, guaranteed access to individual health coverage, and special enrollment rights, as well as a reference to where to obtain additional information about such rights, and a description of the plan's procedures for revoking a waiver of the right to continuation coverage;
• A description of the continuation coverage that will be made available under the plan, if elected, including the date the coverage will begin, either by providing a description of the coverage or by referring to the plan's summary plan description;
• An explanation of the maximum period for which continuation coverage will be available and an explanation of any events that might cause continuation coverage to terminate early;
• A description of any circumstances under which the maximum period of continuation coverage may be extended due to the occurrence of a second qualifying event or a determination by the Social Security Administration that the qualified beneficiary is disabled and the length of any such extension;
• A description of the plan's requirements for qualified beneficiaries to provide notice of a second qualifying event, notice of a Social Security disability determination, and notice that a disabled qualified beneficiary has been determined to no longer be disabled, including the time limits for providing such notices and the consequences of failing to provide such notices;
• A description of the amount, if any, that each qualified beneficiary will be required to pay for continuation coverage;
• A description of the due dates for payments, the qualified beneficiaries' right to pay on a monthly basis, the grace periods for payment, the address to which payments should be sent, and the consequences of delayed payment and nonpayment;
• An explanation of the importance of keeping the administrator informed of the current addresses of all participants or beneficiaries under the plan who are or may become qualified beneficiaries; and
• A statement that the notice does not fully describe continuation coverage or other rights under the plan, and that more complete information is available in the plan's summary plan description or from the plan administrator.
This election notice must go to each qualified beneficiary except that a single notice may go to a covered employee and spouse residing at the same address, or to the covered employee or spouse for each dependent child residing at the same address. Determination of residence may be made “on the basis of the most recent information available to the plan.”
Model Election Notice and Election Form. The DOL has issued a Model COBRA Continuation Election Notice and Election Form that includes all the required content. The model election notice may be obtained at http://www.dol.gov/ebsa/cobra.html.
Since some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through health insurance exchanges (or “marketplaces”), the DOL has modified the election notice under COBRA to include this information.
Notice of unavailability of continuation coverage. The DOL's COBRA notice regulations add two additional notice requirements for plan administrators not specified in the COBRA statute. The first is the notice of unavailability of continuation coverage (29 C.F.R. Sec. 2590.606-4). This notice must be provided after receiving a notice of a qualifying event from an employee or family member if the plan determines that an individual is not eligible for COBRA. This notice should explain why the individual is not entitled to continuation coverage and should be provided within 14 days after the plan administrator received notice of the qualifying event from the individual.
Notice of termination of continuation coverage. The second additional requirement is a notice of termination of continuation coverage that must be provided when the plan terminates coverage before the end of the maximum coverage period (29 C.F.R. Sec. 2590.606-4). This notice must be in writing and contain the reason for the early termination, the date of the termination, and the rights the qualified beneficiary may have to alternative coverage. The early termination notice must be provided as soon as practicable following the decision to terminate.
DOL has not issued model language for the notice of noneligibility for COBRA coverage and the notice of early termination of COBRA coverage.
The Trade Adjustment Assistance Act of 2002 requires that a “second-chance” COBRA election be provided to individuals who did not elect COBRA during the general election period, but who later became eligible for trade adjustment assistance (TAA). Workers who have lost their jobs as a direct result of competition from foreign trade or production being moved overseas may be eligible for TAA benefits. An individual is entitled to a second COBRA election period if he or she:
• Becomes eligible for TAA;
• Lost his or her group health plan coverage because of a job loss that resulted in eligibility for TAA; and
• Did not elect COBRA during his or her initial COBRA election period.
Second-chance election period. A TAA-eligible individual who previously did not elect COBRA may elect continuation coverage and may exercise a second-chance election during the 60-day period that begins on the first day of the month in which the individual becomes a TAA-eligible individual, but only if the election is made no later than six months after the date of the original loss of coverage.
Taking Family and Medical Leave Act (FMLA) leave is not always a qualifying event that sets off COBRA's notice requirements (26 CFR Sec. 54.4980B-10). A qualifying event occurs only if three conditions are met:
• The employee (or spouse or dependent) is covered on the day before the first day of FMLA leave (or becomes covered during the FMLA leave) by the employer's group health plan;
• The employee does not return to work at the end of FMLA leave; and
• The employee would, in the absence of COBRA, lose coverage under the health plan before the end of the maximum coverage period provided by COBRA.
If all three conditions are met, a qualifying event occurs on the last day of FMLA leave. The maximum COBRA coverage period is generally measured from the date of this qualifying event. If coverage would be lost on a later date, the maximum coverage period would be measured from that date.
The IRS also states that:
• State and local laws that may require group health plan coverage during a leave of absence for more time than required by FMLA do not affect the determination of when a COBRA qualifying event has occurred.
• A qualifying event still occurs even if an employee fails to pay his or her share of group health plan premiums during the FMLA leave or declined group health plan coverage during the leave.
• The right to take COBRA continuation may not be conditioned upon repayment by an ex-employee of any premiums paid by the employer for group health coverage during FMLA leave.
COBRA requires that if a plan makes conversion options available to any participants, it must offer a qualified beneficiary the option to enroll under an individual health plan at the end of the applicable 18- or 36-month continuation period. The insured must pay the entire premium at the applicable individual rate, which may be more expensive.
Last reviewed on February 22, 2017.
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National
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is intended to ensure that employees and their dependents can maintain their group healthcare coverage following certain events that otherwise would result in termination of coverage. COBRA’s protections are temporary and are intended as a stopgap until insurance is obtained from another source, such as a new employer. Employers do not have to pay for any portion of the premiums for COBRA coverage, but the beneficiaries get to maintain their insurance at less expensive group rates.
COBRA requires group health plans sponsored by covered employers to allow qualified beneficiaries to have "COBRA continuation coverage" in the event that they lose group health plan coverage for specified reasons. COBRA applies only to employers who had 20 or more employees on more than 50 percent of typical business days during the prior calendar year. In some situations, insured employees have continuation rights under both federal and state law. In such cases, employees may choose the more favorable law. Under both federal and almost all state laws, continuation requires the insured to pay the full premium (including the former employer's share), but the insured does get the advantage of cheaper group rates.
Federal COBRA continuation does not apply to any employer-sponsored group health plan if the employer normally employed fewer than 20 employees during the prior calendar year. An employer is considered to have normally employed fewer than 20 employees during a particular calendar year if it had fewer than 20 employees on at least 50 percent of its typical business days during that year. When counting employees for this purpose, only “common-law employees” are counted. Thus, self-employed individuals, independent contractors, and directors are not counted. Employees of all members of a controlled group are counted, including employees of a foreign member of the controlled group. Part-time employees are also counted as a fractional equivalent of a full-time employee. The fractional equivalent is calculated by dividing the hours that the part-time employee works per week by the number of hours that an employee must work in order to be considered a full-time employee.
Covered employees. A “covered employee” is an individual who is eligible to be covered under a group health plan by virtue of the performance of services for the employer maintaining the plan or membership in the employee organization maintaining the plan. Self-employed individuals, independent contractors (and their employees), and corporate directors are considered to be “covered employees” if their relationship to the employer maintaining the plan makes them eligible to be covered under the plan.
Qualified beneficiaries. A "qualified beneficiary" is an individual who, on the day before a “qualifying event,” is covered by a group health plan maintained by an employer. The individual can be a covered employee, the spouse of a covered employee, or a dependent child of the covered employee. A special rule allows a child who is born to or placed for adoption with a covered employee during a period of COBRA continuation coverage to be a qualified beneficiary.
Group health plan. A group health plan for purposes of COBRA is defined as an employee benefit plan providing “medical care” to participants or beneficiaries directly or through insurance, reimbursement, or otherwise. Coverage may be provided through insurance, an on-site facility, or be self-funding. This definition is quite broad and includes plans that are both contributory and noncontributory. However, specifically excluded from coverage are plans where substantially all the benefits are for qualified long-term care services.
Medical care. Medical care includes the diagnosis, cure, medication, treatment, or prevention of disease, or any other undertaking for the purpose of affecting any structure or function of the body. It also includes transportation that is essential to such health care. On the other hand, medical care does not include benefits that are merely beneficial to the general health of an individual, such as a vacation.
Qualifying events. Qualifying events are the events whose occurrence entitle an individual to COBRA continuation coverage if the event causes loss of coverage.
COBRA continuation coverage is an extension of the coverage that the qualified beneficiary had immediately before the qualifying event. The plan sponsor must provide an opportunity for qualified beneficiaries of a plan to continue coverage if they would lose coverage as a result of a qualifying event. COBRA continuation coverage must be the same as the coverage provided to similarly situated beneficiaries with respect to whom a qualifying event has not occurred. Modifications to the plan will apply to qualified beneficiaries if such modifications apply to similarly situated beneficiaries for whom a qualifying event has not occurred.
The length of time an insured must be allowed to continue coverage depends upon the qualifying event, i.e., the reason the individual has lost group coverage. In cases where an employer is covered by both state and federal law, the law more favorable to the employee applies. For specific state-law continuation rights,
The following events qualify an individual for COBRA continuation coverage if the event causes loss of coverage for a qualified beneficiary:
• Termination or reduction of hours of a covered employee (other than because of the employee’s gross misconduct);
• Death of a covered employee;
• Divorce or legal separation;
• The covered employee becomes entitled to Medicare benefits;
• “Aging out” of a child, (i.e., he or she ceases to be a dependent child under the age requirements of the plan); and
• Bankruptcy of the employer from which the covered employee retired.
Termination for gross misconduct is not a qualifying event, and COBRA continuation coverage does not have to be offered to an employee terminated for gross misconduct and his or her spouse and dependent children. The term “gross misconduct” is not defined either in the statute or in the regulations, and no standard has been consistently articulated or applied by courts or regulators. Accordingly, any decision to deny COBRA coverage based on an employee’s gross misconduct should be reviewed by an attorney.
In general, benefits under COBRA continuation coverage begin on the date of the qualifying event. Thus, the beginning date for calculating how long the benefits last is usually the date of the qualifying event. COBRA continuation rights are generally limited to either 18 or 36 months (with the exception of bankruptcy as the qualifying event).
18 months. A qualified beneficiary is entitled to continue coverage under COBRA for a maximum period of 18 months if coverage would otherwise end due to:
• Termination of employment; or
• Reduction of hours.
36 months. A qualified beneficiary who is a spouse or dependent child is entitled to continue coverage under COBRA for a maximum period of 36 months if coverage would otherwise end due to:
• Death of the covered employee;
• Divorce or legal separation from the covered employee;
• Entitlement of the covered employee for Medicare benefits; or
• Disqualification of a child as a dependent because of age.
Second qualifying events. If a qualified beneficiary is otherwise entitled to a maximum of 18 months of continuation coverage, the qualified beneficiary may become entitled to an additional 18-month extension (giving a total maximum period of 36 months of continuation coverage) if the qualified beneficiary experiences certain second qualifying events. Such events include:
• The death of a covered employee;
• The divorce or legal separation of a covered employee;
• A covered employee becomes entitled to Medicare; and
• A loss of dependent child status under the plan.
However, the second event can be a second qualifying event only if it would have caused the qualified beneficiary to lose coverage under the plan in the absence of the first qualifying event.
Lifetime of retiree. A qualified beneficiary who is a retired employee and his or her spouse and dependent children are allowed to continue coverage for the retiree's lifetime if coverage would otherwise end due to a bankruptcy proceeding plus an additional 36 months for a surviving spouse and dependent children.
Qualified beneficiaries become eligible for a disability extension of 11 additional months (to a total of 29 months) if any of the individuals who lost coverage because of the same qualifying event is determined to be disabled for Social Security purposes during the first 60 days following the qualifying event. Thus, the employee, his or her spouse, and any dependents who were covered prior to the employee losing his or her job or having a reduction in hours are all separately entitled to the extension if any one of them meets the disability criteria.
The disabled qualified beneficiary (or another person on his or her behalf) must also notify the plan of the disability determination before the end of the 18-month period following the qualifying event (i.e., the covered employee's termination of employment or reduction of hours). The plan can set a time limit for providing this notice of disability, but the time limit cannot be shorter than 60 days, starting from the latest of:
• The date on which the Social Security Administration (SSA) issues the disability determination;
• The date on which the qualifying event occurs;
• The date on which the qualified beneficiary loses (or would lose) coverage under the plan as a result of the qualifying event; or
• The date on which the qualified beneficiary is informed, through the furnishing of the summary plan document or the COBRA general notice, of the responsibility to notify the plan and the procedures for doing so.
The right to the disability extension may be terminated if the SSA determines that the disabled qualified beneficiary is no longer disabled. The plan can require qualified beneficiaries receiving the disability extension to notify it if the SSA makes such a determination, although the plan must give the qualified beneficiaries at least 30 days after the SSA determination to give such notice.
A child born or placed for adoption during the COBRA period is a qualified beneficiary. Thus, COBRA participants must be allowed to change their coverage status upon the birth or adoption of a child so that the child is covered for the balance of the continuation period. The length of the child's COBRA coverage is measured from the date of the original qualifying event.
A COBRA beneficiary must be given the same open enrollment period rights as similarly situated active employees covered by the plan, including the right to switch to another plan, another benefit package, or to add or eliminate coverage of family members.
A qualified beneficiary receiving COBRA coverage has the same special enrollment and open enrollment rights to add coverage for family members as do similarly situated active employees covered by the plan. Children born to or adopted by a qualified beneficiary are qualified beneficiaries, and COBRA coverage may be elected for them. New spouses may be added during special enrollment periods. Spouses and dependents may also be added to coverage during open enrollment periods if the plan allows active employees to do so. New spouses added during special enrollment periods and spouses and dependents added during an open enrollment period are not qualified beneficiaries and are not eligible for extended coverage if the qualified beneficiary experiences a second qualifying event.
Continuees may be charged no more than 102 percent of the group rate. For self-insured plans, the charge may be based on actuarial estimates, or in certain cases on the previous year's costs, adjusted for inflation. Premiums from continuees are “timely” if received within 30 days of the due date (or the time allowed by the insurer, if longer).
The right to COBRA continuation of coverage can be cut off prematurely if:
• The covered individual fails to pay the premiums in a timely manner;
• The beneficiary (former employee, spouse, or dependent) after electing COBRA becomes covered under another group health plan, through remarriage, or for another reason;
• The employer terminates its group health plan for all of its employees;
• The beneficiary, after electing COBRA, becomes entitled to Medicare benefits; or
• A qualified beneficiary engages in conduct that would justify the plan in terminating coverage of a similarly situated participant or beneficiary not receiving continuation coverage (e.g., fraud).
Department of Labor (DOL) regulations clarify the various COBRA notice requirements (29 CFR 2590.606-1et seq.). The regulations cover the following:
• The general notice of COBRA rights that is provided to participants and spouses;
• The qualifying event notices employers must provide to plan administrators;
• The notice employees and family members must provide to plan administrators;
• The election notice that plan administrators must provide to qualified beneficiaries;
• The notice plan administrators must provide to individuals requesting COBRA coverage when the coverage is unavailable; and
• The notice plan administrators must provide to qualified beneficiaries when COBRA coverage is terminated before the individual's maximum coverage period ends.
The General Notice of COBRA Rights provides basic information about COBRA. It must be provided to covered employees and spouses by the latter of 90 days after plan coverage begins or 90 days after the plan first becomes subject to COBRA. Including the required information in the summary plan description (SPD), which must be distributed by the same deadline, can also satisfy the requirement. But note, the SPD only has to go to the covered employee, not to the spouse.
If “on the basis of the most recent information available to the plan” a married couple resides at the same address, one notice addressed to both can be used. If the employee and spouse enroll at different times, a separate notice must be sent to each. There is no requirement to furnish a general notice to dependent children. The regulation lists the required contents and includes a model notice that may be used and, when appropriately modified and supplemented, will be deemed to satisfy the content requirement.
Contents of the general notice. The general notice must be written so it can be understood by the average plan participant and must contain the following information:
• The name of the plan and the name, address, and telephone number of a party or parties from whom additional information about the plan and continuation coverage can be obtained;
• A general description of the continuation coverage under the plan, including identification of the classes of individuals who may become qualified beneficiaries; the types of qualifying events that may give rise to the right to continuation coverage; the obligation of the employer to notify the plan administrator of the occurrence of certain qualifying events; the maximum period for which continuation coverage may be available; when and under what circumstances continuation coverage may be extended beyond the applicable maximum period; and the plan's requirements applicable to the payment of premiums for continuation coverage;
• An explanation of the requirement that a qualified beneficiary notify the plan administrator of a qualifying event that is a divorce, legal separation, or a child's ceasing to be a dependent under the terms of the plan and the plan's procedures for providing this notice;
• An explanation of the requirement that a qualified beneficiary provide notice to the plan administrator of a determination by the Social Security Administration that a qualified beneficiary is disabled and a description of the plan's procedures for providing this notice;
• An explanation of the importance of keeping the plan administrator informed of the current addresses of all participants or beneficiaries under the plan; and
• A statement that the notice does not fully describe continuation coverage or other rights under the plan and that more complete information regarding such rights is available from the plan administrator and in the plan's SPD.
A model general notice may be obtained at http://www.dol.gov/ebsa/COBRA.html.
Delivery of the general notice. Plan administrators are to deliver the general notice by means reasonably calculated to ensure actual receipt of the material by plan participants and beneficiaries. The notice must be sent by a method or methods likely to result in full distribution. In-hand delivery to an employee at his or her worksite is acceptable, but merely placing copies of the material in a location frequented by participants is never okay. It is also acceptable to include the notice as a special insert in a periodical distributed to employees, such as a union newspaper or a company publication, if the distribution list for the periodical is comprehensive and up to date. Also, a prominent notice on the front page of the periodical should advise readers that the issue contains a notice about rights under the plan and the law that should be read and retained for future reference.
The notice may be distributed through the mail by first, second, or third class. However, distribution by second- or third-class mail is acceptable only if return and forwarding postage is guaranteed and address correction is requested. Any material sent by second- or third-class mail that is returned with an address correction must be sent again by first-class mail or personally delivered to the participant at his or her worksite.
Electronic distribution. Electronic media may be used for the general notice in accordance with the procedures established by the DOL for other benefit plan disclosures Please see the national Benefits Recordkeeping and Disclosures section. .
Substituting the election notice for the general notice. It is possible that a plan administer may be required to provide an election notice before the time limit for providing the general notice has expired. In such a case, DOL says that it will be sufficient to provide the election notice only.
Employer's qualifying event notice to plan administrator. Employers must notify plan administrators of qualifying events, including terminations of employment, reductions in hours, death of the employee, bankruptcy of the employer, or the employee's Medicare entitlement, within 30 days of the event (29 C.F.R. Sec. 2590.606-2).
Employee or family member notice to plan administrator. Employees or their family member must notify the plan administrator of qualifying events such as divorce or legal separation and loss of dependent status (including when these are second qualifying events) and of a qualified beneficiary's disability or cessation of disability (29 C.F.R. Sec. 2590.606-3). Plans must establish a reasonable procedure for furnishing these notices. A plan's procedure generally will be deemed reasonable if it is described in the plan's SPD, specifies who is designated to receive notices, specifies how qualified beneficiaries must give the notice, and lists the required content of the notice. If a plan does not have reasonable procedures, notice will be deemed to have been provided if information adequately identifying a specific qualifying event is communicated to any of the parties that would customarily be considered in charge of the plan. A specific notice form may be required.
Warning: A plan without a reasonable procedure will have to accept written and oral notices that identify a qualifying event and are made in a way that is reasonably calculated to bring the information to the attention of either the organizational unit that customarily handles benefit matters or any officer of the employer. This means an oral notice to anyone with authority or responsibility for health benefits may be satisfy the requirement.
A plan may not reject an incomplete notice as untimely if the notice is provided within the plan's time limits and contains enough information to enable the plan administrator to identify the plan, the covered employee, qualified beneficiaries, the qualifying event or disability determination, and the date on which it occurred. The plan administrator can require qualified beneficiaries to supply the missing information.
The period for providing a notice of a qualifying event must run to at least 60 days following the qualifying event. If the plan provides that COBRA begins when coverage is actually lost, the 60 days begin then.
The notice that plan administrators provide to qualified beneficiaries must be in writing and must be provided within 14 days after receipt of a notice of a qualifying event from the employer or from the employee or family member (29 C.F.R. Sec. 2590.606-4). In cases where the employer is the plan administrator, this notice is due within 44 days of the event or loss of coverage (whichever applies). This notice must include the following information:
• The name of the plan and the name, address, and telephone number of the party responsible for the administration of continuation coverage benefits;
• Identification of the qualifying event;
• Identification, by status or name, of the qualified beneficiaries who are entitled to elect continuation coverage and the date on which coverage under the plan will terminate (or has terminated) unless continuation coverage is elected;
• A statement that each individual qualified beneficiary has an independent right to elect continuation coverage, that a covered employee or a qualified beneficiary who is the employee's spouse may elect continuation coverage on behalf of all other qualified beneficiaries, or that a parent or legal guardian may elect continuation coverage on behalf of a minor child;
• An explanation of the plan's procedures for electing continuation coverage, including an explanation of the time limits;
• An explanation of the consequences of failing to elect or waiving continuation coverage, including how such a decision will affect the future rights to group health coverage free of preexisting condition limitations, guaranteed access to individual health coverage, and special enrollment rights, as well as a reference to where to obtain additional information about such rights, and a description of the plan's procedures for revoking a waiver of the right to continuation coverage;
• A description of the continuation coverage that will be made available under the plan, if elected, including the date the coverage will begin, either by providing a description of the coverage or by referring to the plan's summary plan description;
• An explanation of the maximum period for which continuation coverage will be available and an explanation of any events that might cause continuation coverage to terminate early;
• A description of any circumstances under which the maximum period of continuation coverage may be extended due to the occurrence of a second qualifying event or a determination by the Social Security Administration that the qualified beneficiary is disabled and the length of any such extension;
• A description of the plan's requirements for qualified beneficiaries to provide notice of a second qualifying event, notice of a Social Security disability determination, and notice that a disabled qualified beneficiary has been determined to no longer be disabled, including the time limits for providing such notices and the consequences of failing to provide such notices;
• A description of the amount, if any, that each qualified beneficiary will be required to pay for continuation coverage;
• A description of the due dates for payments, the qualified beneficiaries' right to pay on a monthly basis, the grace periods for payment, the address to which payments should be sent, and the consequences of delayed payment and nonpayment;
• An explanation of the importance of keeping the administrator informed of the current addresses of all participants or beneficiaries under the plan who are or may become qualified beneficiaries; and
• A statement that the notice does not fully describe continuation coverage or other rights under the plan, and that more complete information is available in the plan's summary plan description or from the plan administrator.
This election notice must go to each qualified beneficiary except that a single notice may go to a covered employee and spouse residing at the same address, or to the covered employee or spouse for each dependent child residing at the same address. Determination of residence may be made “on the basis of the most recent information available to the plan.”
Model Election Notice and Election Form. The DOL has issued a Model COBRA Continuation Election Notice and Election Form that includes all the required content. The model election notice may be obtained at http://www.dol.gov/ebsa/cobra.html.
Since some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through health insurance exchanges (or “marketplaces”), the DOL has modified the election notice under COBRA to include this information.
Notice of unavailability of continuation coverage. The DOL's COBRA notice regulations add two additional notice requirements for plan administrators not specified in the COBRA statute. The first is the notice of unavailability of continuation coverage (29 C.F.R. Sec. 2590.606-4). This notice must be provided after receiving a notice of a qualifying event from an employee or family member if the plan determines that an individual is not eligible for COBRA. This notice should explain why the individual is not entitled to continuation coverage and should be provided within 14 days after the plan administrator received notice of the qualifying event from the individual.
Notice of termination of continuation coverage. The second additional requirement is a notice of termination of continuation coverage that must be provided when the plan terminates coverage before the end of the maximum coverage period (29 C.F.R. Sec. 2590.606-4). This notice must be in writing and contain the reason for the early termination, the date of the termination, and the rights the qualified beneficiary may have to alternative coverage. The early termination notice must be provided as soon as practicable following the decision to terminate.
DOL has not issued model language for the notice of noneligibility for COBRA coverage and the notice of early termination of COBRA coverage.
The Trade Adjustment Assistance Act of 2002 requires that a “second-chance” COBRA election be provided to individuals who did not elect COBRA during the general election period, but who later became eligible for trade adjustment assistance (TAA). Workers who have lost their jobs as a direct result of competition from foreign trade or production being moved overseas may be eligible for TAA benefits. An individual is entitled to a second COBRA election period if he or she:
• Becomes eligible for TAA;
• Lost his or her group health plan coverage because of a job loss that resulted in eligibility for TAA; and
• Did not elect COBRA during his or her initial COBRA election period.
Second-chance election period. A TAA-eligible individual who previously did not elect COBRA may elect continuation coverage and may exercise a second-chance election during the 60-day period that begins on the first day of the month in which the individual becomes a TAA-eligible individual, but only if the election is made no later than six months after the date of the original loss of coverage.
Taking Family and Medical Leave Act (FMLA) leave is not always a qualifying event that sets off COBRA's notice requirements (26 CFR Sec. 54.4980B-10). A qualifying event occurs only if three conditions are met:
• The employee (or spouse or dependent) is covered on the day before the first day of FMLA leave (or becomes covered during the FMLA leave) by the employer's group health plan;
• The employee does not return to work at the end of FMLA leave; and
• The employee would, in the absence of COBRA, lose coverage under the health plan before the end of the maximum coverage period provided by COBRA.
If all three conditions are met, a qualifying event occurs on the last day of FMLA leave. The maximum COBRA coverage period is generally measured from the date of this qualifying event. If coverage would be lost on a later date, the maximum coverage period would be measured from that date.
The IRS also states that:
• State and local laws that may require group health plan coverage during a leave of absence for more time than required by FMLA do not affect the determination of when a COBRA qualifying event has occurred.
• A qualifying event still occurs even if an employee fails to pay his or her share of group health plan premiums during the FMLA leave or declined group health plan coverage during the leave.
• The right to take COBRA continuation may not be conditioned upon repayment by an ex-employee of any premiums paid by the employer for group health coverage during FMLA leave.
COBRA requires that if a plan makes conversion options available to any participants, it must offer a qualified beneficiary the option to enroll under an individual health plan at the end of the applicable 18- or 36-month continuation period. The insured must pay the entire premium at the applicable individual rate, which may be more expensive.
Last reviewed on February 22, 2017.
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