What
is COBRA continuation health coverage?
Congress passed
the landmark Consolidated Omnibus Budget Reconciliation
Act (COBRA) health benefit provisions in 1986.
The law amends the Employee Retirement Income
Security Act, the Internal Revenue Code and
the Public Health Service Act to provide continuation
of group health coverage that otherwise might
be terminated.
What does COBRA do?
COBRA provides
certain former employees, retirees, spouses,
former spouses, and dependent children the
right to temporary continuation of health
coverage at group rates. This coverage, however,
is only available when coverage is lost due
to certain specific events. Group health coverage
for COBRA participants is usually more expensive
than health coverage for active employees,
since usually the employer pays a part of
the premium for active employees while COBRA
participants generally pay the entire premium
themselves. It is ordinarily less expensive,
though, than individual health coverage.
Who
is entitled to benefits under COBRA?
There are three elements to qualifying for
COBRA benefits. COBRA establishes specific
criteria for plans, qualified beneficiaries,
and qualifying events:
Plan Coverage
- Group health plans for employers with 20
or more employees on more than 50 percent
of its typical business days in the previous
calendar year are subject to COBRA. Both full
and part-time employees are counted to determine
whether a plan is subject to COBRA. Each part-time
employee counts as a fraction of an employee,
with the fraction equal to the number of hours
that the part-time employee worked divided
by the hours an employee must work to be considered
full time.
Qualified Beneficiaries
- A qualified beneficiary generally is an
individual covered by a group health plan
on the day before a qualifying event who is
either an employee, the employee's spouse,
or an employee's dependent child. In certain
cases, a retired employee, the retired employee's
spouse, and the retired employee's dependent
children may be qualified beneficiaries. In
addition, any child born to or placed for
adoption with a covered employee during the
period of COBRA coverage is considered a qualified
beneficiary. Agents, independent contractors,
and directors who participate in the group
health plan may also be qualified beneficiaries.
Qualifying Events
- Qualifying events are certain events that
would cause an individual to lose health coverage.
The type of qualifying event will determine
who the qualified beneficiaries are and the
amount of time that a plan must offer the
health coverage to them under COBRA. A plan,
at its discretion, may provide longer periods
of continuation coverage.
Qualifying Events for
Employees:
 |
Voluntary
or involuntary termination of employment
for reasons other than gross misconduct |
|
Reduction in the number
of hours of employment |
Qualifying Events for Spouses:
|
Voluntary
or involuntary termination of the covered
employee's employment for any reason other
than gross misconduct |
|
Reduction in the hours
worked by the covered employee |
|
Covered employee's
becoming entitled to Medicare |
|
Divorce or legal separation
of the covered employee |
|
Death of the covered
employee |
Qualifying Events for Dependent
Children:
|
Loss of
dependent child status under the plan
rules |
|
Voluntary or involuntary
termination of the covered employee's
employment for any reason other than gross
misconduct |
|
Reduction in the hours
worked by the covered employee |
|
Covered employee's
becoming entitled to Medicare |
Divorce or legal separation
of the covered employee, Death of the covered
employee
How
does a person become eligible for COBRA continuation
coverage?
To be eligible for COBRA coverage, you must
have been enrolled in your employer's health
plan when you worked and the health plan must
continue to be in effect for active employees.
COBRA continuation coverage is available upon
the occurrence of a qualifying event that
would, except for the COBRA continuation coverage,
cause an individual to lose his or her health
care coverage.
What
group health plans are subject to COBRA?
The law generally covers health plans maintained
by private-sector employers with 20 or more
employees, employee organizations, or state
or local governments.
Can
individuals qualify for longer periods of
COBRA continuation coverage?
Yes, disability can extend the 18 month period
of continuation coverage for a qualifying
event that is a termination of employment
or reduction of hours. To qualify for additional
months of COBRA continuation coverage, the
qualified beneficiary must:
|
Have a
ruling from the Social Security Administration
that he or she became disabled within
the first 60 days of COBRA continuation
coverage |
|
Send the plan a copy
of the Social Security ruling letter within
60 days of receipt, but prior to expiration
of the 18-month period of coverage |
If these requirements are
met, the entire family qualifies for an additional
11 months of COBRA continuation coverage.
Plans can charge 150% of the premium cost
for the extended period of coverage.
Is
a divorced spouse entitled to COBRA coverage
from their former spouses’ group health
plan?
Under COBRA, participants, covered spouses
and dependent children may continue their
plan coverage for a limited time when they
would otherwise lose coverage due to a particular
event, such as divorce (or legal separation).
A covered employee’s spouse who would
lose coverage due to a divorce may elect continuation
coverage under the plan for a maximum of 36
months. A qualified beneficiary must notify
the plan administrator of a qualifying event
within 60 days after divorce or legal separation.
After being notified of a divorce, the plan
administrator must give notice, generally
within 14 days, to the qualified beneficiary
of the right to elect COBRA continuation coverage.
Divorced spouses may call
their plan administrator or the EBSA Toll-Free
Employee & Employer Hotline number, 1.866.444.EBSA
(3272) if they have questions about COBRA
continuation coverage or their rights under
ERISA.
If I waive COBRA coverage during the election
period, can I still get coverage at a later
date?
If a qualified beneficiary
waives COBRA coverage during the election
period, he or she may revoke the waiver of
coverage before the end of the election period.
A beneficiary may then elect COBRA coverage.
Then, the plan need only provide continuation
coverage beginning on the date the waiver
is revoked.
Under
COBRA, what benefits must be covered?
Qualified beneficiaries must be offered coverage
identical to that available to similarly situated
beneficiaries who are not receiving COBRA
coverage under the plan (generally, the same
coverage that the qualified beneficiary had
immediately before qualifying for continuation
coverage). A change in the benefits under
the plan for the active employees will also
apply to qualified beneficiaries. Qualified
beneficiaries must be allowed to make the
same choices given to non-COBRA beneficiaries
under the plan, such as during periods of
open enrollment by the plan.
When
does COBRA coverage begin?
COBRA coverage begins on the date that health
care coverage would otherwise have been lost
by reason of a qualifying event.
How
long does COBRA coverage last?
COBRA establishes
required periods of coverage for continuation
health benefits. A plan, however, may provide
longer periods of coverage beyond those required
by COBRA. COBRA beneficiaries generally are
eligible for group coverage during a maximum
of 18 months for qualifying events due to
employment termination or reduction of hours
of work. Certain qualifying events, or a second
qualifying event during the initial period
of coverage, may permit a beneficiary to receive
a maximum of 36 months of coverage.
Coverage
begins on the date that coverage would otherwise
have been lost by reason of a qualifying event
and will end at the end of the maximum period.
It may end earlier if:
|
Premiums
are not paid on a timely basis |
|
The employer ceases
to maintain any group health plan |
|
After the COBRA election,
coverage is obtained with another employer
group health plan that does not contain
any exclusion or limitation with respect
to any pre-existing condition of such
beneficiary. However, if other group health
coverage is obtained prior to the COBRA
election, COBRA coverage may not be discontinued,
even if the other coverage continues after
the COBRA election. |
|
After the COBRA election,
a beneficiary becomes entitled to Medicare
benefits. However, if Medicare is obtained
prior to COBRA election, COBRA coverage
may not be discontinued, even if the other
coverage continues after the COBRA election. |
Although COBRA specifies
certain periods of time that continued health
coverage must be offered to qualified beneficiaries,
COBRA does not prohibit plans from offering
continuation health coverage that goes beyond
the COBRA periods.
Some plans allow participants
and beneficiaries to convert group health
coverage to an individual policy. If this
option is generally available from the plan,
a qualified beneficiary who pays for COBRA
coverage must be given the option of converting
to an individual policy at the end of the
COBRA continuation coverage period. The option
must be given to enroll in a conversion health
plan within 180 days before COBRA coverage
ends. The premium for a conversion policy
may be more expensive than the premium of
a group plan, and the conversion policy may
provide a lower level of coverage. The conversion
option, however, is not available if the beneficiary
ends COBRA coverage before reaching the end
of the maximum period of COBRA coverage.
Who
pays for COBRA coverage?
Beneficiaries may be required to pay for COBRA
coverage. The premium cannot exceed 102 percent
of the cost to the plan for similarly situated
individuals who have not incurred a qualifying
event, including both the portion paid by
employees and any portion paid by the employer
before the qualifying event, plus 2 percent
for administrative costs.
For
qualified beneficiaries receiving the 11 month
disability extension of coverage, the premium
for those additional months may be increased
to 150 percent of the plan's total cost of
coverage.
COBRA
premiums may be increased if the costs to
the plan increase but generally must be fixed
in advance of each 12-month premium cycle.
The plan must allow you to pay premiums on
a monthly basis if you ask to do so, and the
plan may allow you to make payments at other
intervals (weekly or quarterly).
The
initial premium payment must be made within
45 days after the date of the COBRA election
by the qualified beneficiary. Payment generally
must cover the period of coverage from the
date of COBRA election retroactive to the
date of the loss of coverage due to the qualifying
event. Premiums for successive periods of
coverage are due on the date stated in the
plan with a minimum 30-day grace period for
payments. Payment is considered to be made
on the date it is sent to the plan.
If
premiums are not paid by the first day of
the period of coverage, the plan has the option
to cancel coverage until payment is received
and then reinstate coverage retroactively
to the beginning of the period of coverage.
If
the amount of the payment made to the plan
is made in error but is not significantly
less than the amount due, the plan is required
to notify you of the deficiency and grant
a reasonable period (for this purpose, 30
days is considered reasonable) to pay the
difference. The plan is not obligated to send
monthly premium notices.
COBRA
beneficiaries remain subject to the rules
of the plan and therefore must satisfy all
costs related to co-payments and deductibles,
and are subject to catastrophic and other
benefit limits.
If
I elect COBRA, how much do I pay?
When you were
an active employee, your employer may have
paid all or part of your group health premiums.
Under COBRA, as a former employee no longer
receiving benefits, you will usually pay the
entire premium amount, that is, the portion
of the premium that you paid as an active
employee and the amount of the contribution
made by your employer. In addition, there
may be a 2 percent administrative fee.
While COBRA rates may seem
high, you will be paying group premium rates,
which are usually lower than individual rates.
Since it is likely that there
will be a lapse of a month or more between
the date of layoff and the time you make the
COBRA election decision, you may have to pay
health premiums retroactively-from the time
of separation from the company. The first
premium, for instance, will cover the entire
time since your last day of employment with
your former employer.
You
should also be aware that it is your responsibility
to pay for COBRA coverage even if you do not
receive a monthly statement.
Although
they are not required to do so, some employers
may subsidize COBRA coverage.
Can I receive COBRA benefits while on FMLA
leave?
The Family and Medical Leave Act, effective
August 5, 1993, requires an employer to maintain
coverage under any group health plan for an
employee on FMLA leave under the same conditions
coverage would have been provided if the employee
had continued working. Coverage provided under
the FMLA is not COBRA coverage, and FMLA leave
is not a qualifying event under COBRA. A COBRA
qualifying event may occur, however, when
an employer's obligation to maintain health
benefits under FMLA ceases, such as when an
employee notifies an employer of his or her
intent not to return to work.
Further
information on FMLA is available from the
nearest office of the Wage and Hour Division,
listed in most telephone directories under
U.S. Government, U.S. Department of Labor,
Employment Standards Administration.
What is the Federal Government's role in COBRA?
COBRA continuation
coverage laws are administered by several
agencies. The Departments of Labor and Treasury
have jurisdiction over private-sector health
group health plans. The Department of Health
and Human Services administers the continuation
coverage law as it affects public-sector health
plans.
The
Labor Department's interpretive and regulatory
responsibility is limited to the disclosure
and notification requirements of COBRA. If
you need further information on your disclosure
or notification rights under a private-sector
plan, or about ERISA generally, telephone
EBSA's Toll-Free Employee & Employer Hotline
at: 1.866.444.3272, or write to:
U.S. Department
of Labor
Employee Benefits Security Administration
Division of Technical Assistance and Inquiries
200 Constitution Avenue NW, Suite N-5619
Washington, DC 20210
The Internal
Revenue Service, Department of the Treasury,
has issued regulations on COBRA provisions
relating to eligibility, coverage and premiums
in 26 CFR Part 54, Continuation Coverage Requirements
Applicable to Group Health Plans. Both the
Departments of Labor and Treasury share jurisdiction
for enforcement of these provisions.
The Center for Medicare and Medicaid Services
offers information about COBRA provisions
for public-sector employees. You can write
them at this address:
Centers for Medicare
and Medicaid Services
7500 Security Boulevard
Mail Stop S3-16-16
Baltimore, MD 21244-1850
Tel 410.786.3000
I am a federal employee.
Can I receive benefits under COBRA?
Federal employees are covered by a law similar
to COBRA. Those employees should contact the
personnel office serving their agency for
more information on temporary extensions of
health benefits.
Am I eligible for COBRA if
my company closed or went bankrupt and there
is no health plan?
If there is no longer
a health plan, there is no COBRA coverage
available. If, however, there is another plan
offered by the company, you may be covered
under that plan. Union members who are covered
by a collective bargaining agreement that
provides for a medical plan also may be entitled
to continued coverage.
How
do I find out about COBRA coverage and how
do I elect to take it?
Employers or
health plan administrators must provide an
initial general notice if you are entitled
to COBRA benefits. You probably received the
initial notice about COBRA coverage when you
were hired.
When you are no longer eligible
for health coverage, your employer has to
provide you with a specific notice regarding
your rights to COBRA continuation benefits.
Employers must notify their
plan administrators within 30 days after an
employee's termination or after a reduction
in hours that causes and employee to lose
health benefits.
The plan administrator must
provide notice to individual employees of
their right to elect COBRA coverage within
14 days after the administrator has received
notice from the employer.
You must respond to this
notice and elect COBRA coverage by the 60th
day after the written notice is sent or the
day health care coverage ceased, whichever
is later. Otherwise, you will lose all rights
to COBRA benefits.
Spouses
and dependent children covered under your
health plan have an independent right to elect
COBRA coverage upon your termination or reduction
in hours. If, for instance, you have a family
member with an illness at the time you are
laid off, that person alone can elect coverage.
