|
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.
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.
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:
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
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.
The law generally covers health plans maintained by private-sector
employers with 20 or more employees, employee organizations, or
state or local governments.
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 60 days after divorce or legal separation or a
child's ceasing to be covered as a dependent under plan rules.
Plan participants
and beneficiaries generally must be sent an election notice not
later than 14 days after the plan administrator receives notice
that a qualifying event has occurred. The individual then
has 60 days to decide whether to elect COBRA continuation
coverage. The person has 45 days after electing coverage to
pay the initial premium.
Qualified beneficiaries must be given an election period during
which each qualified beneficiary may choose whether to elect COBRA
coverage. Each qualified beneficiary may independently elect
COBRA coverage. A covered employee or the covered employee's
spouse may elect COBRA coverage on behalf of all other qualified
beneficiaries. A parent or legal guardian may elect on
behalf of a minor child. 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 by the employer or plan
administrator. The election 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.
Health plan rules must explain how to obtain benefits and must
include written procedures for processing claims. Claims
procedures must be described in the Summary Plan Description.
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 reasons for the denial,
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.
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.
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 number,
1.866.444.EBSA (3272) if they have questions about COBRA
continuation coverage or their rights under ERISA.
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.
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.
COBRA coverage begins on the date that health care coverage would
otherwise have been lost by reason of a qualifying event.
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.
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.
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.
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.
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 number 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 C1-22-06
Baltimore, MD 21244-1850
Tel 1.877.267.2323 x61565
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.
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.
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.
|