1. Q: What is COBRA? A: There was a time when group health coverage was at a risk when a worker lost his job, changed employment, or got divorced. That changed in 1986 with the passage of health benefit provisions in the Consolidated Omnibus Budget Reconciliation Act (COBRA). Now, terminated employees or their families who may lose coverage because of termination of employment, death, divorce or other life events may be able to continue the coverage under the employer's group health plan for themselves and their families for limited periods of time.
2. Q:Initial & Other Notices A:If you are eligible for COBRA coverage, your health plan must give you a notice stating your right to choose to continue coverage under the plan. You will have at least 60 days to choose COBRA coverage or lose all rights to benefits. Once COBRA coverage is chosen, You may be required to pay for the coverage. Generally, an initial notice describing COBRA rights must be furnished to covered employees and their spouses at the time coverage under the plan commences General COBRA rights must be described in the summary plan description (SPD) that all participants receive. ERISA requires employers to furnish modified and updated SPDs containing certain plan information and summaries of material changes in plan requirements. Plan administrators must automatically furnish the SPD 90 days after a person becomes a participant or a beneficiary begins receiving benefits or within 120 days after the plan is first subject to the reporting and disclosure provisions of ERISA.
Other notices
These notice requirements are triggered for employers, qualified beneficiaries and plan administrators when a qualifying event occurs. Employers must notify plan administrators of a qualifying event within 30 days after an employee's death, termination, reduced hours of employment or entitlement to Medicare.
A qualified beneficiary must notify the plan administrator of a qualifying event within the 60 days after divorce or legal separation or a child's ceasing to be covered as a dependent under plan rules.
Plan administrators, upon receiving notice of a qualifying event, must provide an election notice to the qualified beneficiaries of their right to elect COBRA coverage. The notice must be provided in person or by first class mail within 14 days after the plan administrator receives notice that a qualifying event has occurred.
There are two special exceptions to the notice requirements for multiemployer plans. First, the time frame for providing notices may be extended beyond the 14- and 30- day requirements if allowed by plan rules. Second, if the plan rules allow, employers may be relieved of the obligation to notify plan administrators when employees terminate or reduce their work hours. Plan administrators would then be responsible for determining whether these qualifying events have occurred.
Qualified beneficiaries who wish to take advantage of the 11- month disability extension must notify plan administrators of the disabled qualified beneficiary's Social Security disability determinations. A notice must be provided within 60 days of a disability determination and prior to expiration of the initial 18- month period of COBRA coverage. These beneficiaries also must notify the plan if the qualified beneficiary is determined by Social Security to be no longer disabled.
3. Q: Minimum # of Employess Required A: The law generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments. The law does not, however, apply to plans sponsored by the Federal government and certain church-related organizations. Provisions of COBRA covering state and local government plans are administered by the Department of Health and Human Services.
4. Q: How To Determine Minimum # of Employees A: 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.
5. Q: What Is Considered To Be a Group Health Plan? A: Under COBRA, a group health plan ordinarily is defined as a plan that provides medical benefits for the employer's own employees and their dependents through insurance or another mechanism such as a trust, health maintenance organization, self-funded pay as-you-go basis, reimbursement or combination of these. Medical benefits provided under the terms of the plan and available to COBRA beneficiaries may include:
Inpatient and outpatient hospital care
Physician care
Surgery and other major medical benefits
Prescription drugs
Any other medical benefits, such as dental and vision care.
Life insurance, however, is not covered under COBRA
6. Q: What Is a Qualified Beneficiary? A: 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 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.
7. Q: Qualifying Events A: "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.
The qualifying events for employees are:
Voluntary or involuntary termination of employment for reasons other than "gross misconduct"
Reduction in the number of hours of employment
The qualifying events for the spouses are:
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
Divorced or legal separation of the covered employee
Death of the covered employee
The qualifying events of dependent children are the same as for the spouse with one addition:
Loss of "dependent child" status under the plan rules
8. Q: Election A: Qualified beneficiaries must be given an election period during which each qualified beneficiary may choose whether to elect COBRA coverage. Qualified beneficiaries must be given at least 60 days for the election. This period is measured from the later of the coverage loss date or the date the COBRA election notice is provided. COBRA coverage is retroactive if elected and paid for by the qualified beneficiary.
Each qualified beneficiary may independently elect COBRA coverage. A covered employee or the covered employee's spouse, however, may elect COBRA coverage on behalf of all other qualified beneficiaries. A parent or legal guardian may elect on behalf of a minor child.
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.
9. Q: Duration of Coverage A: 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 the 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.
Special rules for disabled individuals and certain family members may extend the maximum periods of coverage. If a qualified beneficiary is determined under title II or XVI of the Social Security Act to have been disabled within the first 60 days of COBRA coverage, then that qualified beneficiary and all of the qualified beneficiaries in his or her family may be able to extend COBRA continuation coverage for up to an additional 11 months. However, qualified beneficiaries should be aware that they may lose all rights to the additional 11 months of coverage if notice of the determination is not provided within 60 days of the date of the determination and before the expiration of the 18- month COBRA continuation period. The qualified beneficiary who is disabled or any qualified beneficiaries in his or her family may notify the plan administrator of the determination.
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 available from the plan, you have the right to exercise the option under COBRA when you reach the end of your COBRA continuation coverage. 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.
10. Q: Paying for COBRA A: 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 increase 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 (for example, 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 the 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 grand 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 copayments and deductibles, and are subject to catastrophic and other benefit limits.
11. Q: Claims Procedures A: Health plan rules must explain how to obtain benefits and must include written procedures for processing claims. Claims procedures must be described in the SPD.
You should submit a claim for benefits in accordance with the plan's rules for filing claims. If the claim is denied, you must be given notice of the denial in writing generally within 90 days after the claim is filed. The notice should state the reason for the denial, and any additional information needed to support the claim and procedures for appealing the denial.
You will have at least 60 days to appeal a denial and you must receive a decision on the appeal generally within 60 days after that.
Contact the plan administrator for more information on filing a claim for benefits. Complete plan rules are available from employers or benefits offices. There can be charges up to 25 cents a page for copies of plan rules.
12. Q: Coordination With Other Benefits A: The Family and Medical Leave Act (FMLA), effective August 5, 1993, requires an employer to maintain coverage under and "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.
13. Q: Does a startup business have to comply with federal COBRA regulations? A: A group health plan is not subject to COBRA for any calendar year “if all employers maintaining such plan normally employed fewer than 20 employees on a typical business day during the preceding calendar year.” A company that had no employees in the preceding calendar year (and is not related to any other employer whose employees would have to be counted), falls within the definition of a small employer during the first year of operation.* Small employers are exempt from IRS COBRA regulations. However, small employers may be subject to State Continuation Coverage. *Treas. Reg. 54.4980B-2
14. Q: Information Source ©2000 U.S. DOL A: The majority of the information on the National Benefit Services COBRA Questions & Answers page, was obtained directly from the U.S. Department of Labor "Health Benefits Under the Consolidated Omnibus Budget Reconciliation Act COBRA" publication. Click here to download the full version of the publication in PDF format.