Understand COBRA for Health Insurance

Benefits under Continuation Coverage

If you elect continuation coverage, the coverage you are given must be identical to the coverage that is currently available under the plan to similarly situated active employees and their families (generally, this is the same coverage that you had immediately before the qualifying event). You will also be entitled, while receiving continuation coverage, to the same benefits, choices, and services that a similarly situated participant or beneficiary is currently receiving under the plan, such as the right during an open enrollment season to choose among available coverage options. You will also be subject to the same rules and limits that would apply to a similarly situated participant or beneficiary, such as co-payment requirements, deductibles, and coverage limits. The plan’s rules for filing benefit claims and appealing any claims denials also apply.

Any changes made to the plan’s terms that apply to similarly situated active employees and their families will also apply to qualified beneficiaries receiving COBRA continuation coverage. If a child is born to or adopted by a covered employee during a period of continuation coverage, the child is automatically considered to be a qualified beneficiary receiving continuation coverage. You should consult your plan for the rules that apply for adding your child to continuation coverage under those circumstances.

Duration of Continuation Coverage

Maximum Periods

COBRA requires that continuation coverage extend from the date of the qualifying event for a limited period of time of 18 or 36 months. The length of time for which continuation coverage must be made available (the “maximum period” of continuation coverage) depends on the type of qualifying event that gave rise to the COBRA rights. A plan, however, may provide longer periods of coverage beyond the maximum period required by law.

When the qualifying event is the covered employee’s termination of employment or reduction in hours of employment, qualified beneficiaries are entitled to a maximum of 18 months of continuation coverage.

When the qualifying event is the end of employment or reduction of the employee’s hours, and the employee became entitled to Medicare less than 18 months before the qualifying event, COBRA coverage for the employee’s spouse and dependents can last until 36 months after the date the employee becomes entitled to Medicare. For example, if a covered employee becomes entitled to Medicare 8 months before the date his/her employment ends (termination of employment is the COBRA qualifying event), COBRA coverage for his/her spouse and children would last 28 months (36 months minus 8 months).

For all other qualifying events, qualified beneficiaries are entitled to a maximum of 36 months of continuation coverage.

Early Termination

A group health plan may terminate continuation coverage earlier than the end of the maximum period for any of the following reasons:

  • Premiums are not paid in full on a timely basis;
  • The employer ceases to maintain any group health plan;
  • A qualified beneficiary begins coverage under another group health plan after electing continuation coverage, as long as that plan doesn’t impose an exclusion or limitation affecting a preexisting condition of the qualified beneficiary;
  • A qualified beneficiary becomes entitled to Medicare benefits after electing continuation coverage; 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 (such as fraud).

If continuation coverage is terminated early, the plan must provide the qualified beneficiary with an early termination notice.

Extension of an 18-month Period of Continuation Coverage

If you are entitled to an 18-month maximum period of continuation coverage, you may become eligible for an extension of the maximum time period in two circumstances. The first is when a qualified beneficiary (either you or a family member) is disabled; the second is when a second qualifying event occurs.

Disability
If any one of the qualified beneficiaries in your family is disabled and meets certain requirements, all of the qualified beneficiaries receiving continuation coverage due to a single qualifying event are entitled to an 11-month extension of the maximum period of continuation coverage (for a total maximum period of 29 months of continuation coverage). The plan can charge qualified beneficiaries an increased premium, up to 150 percent of the cost of coverage, during the 11-month disability extension.

The requirements are, first, that the disabled qualified beneficiary must be determined by the Social Security Administration (SSA) to be disabled at some time before the 60th day of continuation coverage and, second, that the disability must continue during the rest of the 18-month period of continuation coverage.

The disabled qualified beneficiary or another person on his or her behalf must also notify the plan of the SSA determination. 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: (1) the date on which SSA issues the disability determination; (2) the date on which the qualifying event occurs; (3) the date on which the qualified beneficiary loses (or would lose) coverage under the plan as a result of the qualifying event; or (4) the date on which the qualified beneficiary is informed, through the furnishing of the SPD 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 do so.

The rules for how to give a disability notice and a notice of no longer being disabled should be described in the plan’s SPD (and in the election notice if you are offered an 18-month maximum period of continuation coverage).

Second Qualifying Event
If you are receiving an 18-month maximum period of continuation coverage, you may become entitled to an 18-month extension (giving a total maximum period of 36 months of continuation coverage) if you experience a second qualifying event that is the death of a covered employee, the divorce or legal separation of a covered employee and spouse, a covered employee’s becoming entitled to Medicare, or a loss of dependent child status under the plan. The second event can be a second qualifying event only if it would have caused you to lose coverage under the plan in the absence of the first qualifying event. If a second qualifying event occurs, you will need to notify the plan.

The rules for how to give notice of a second qualifying event should be described in the plan’s SPD (and in the election notice if you are offered an 18-month maximum period of continuation coverage). The plan can set a time limit for providing this notice, but the time limit cannot be shorter than 60 days from the latest of: (1) the date on which the qualifying event occurs; (2) the date on which you lose (or would lose) coverage under the plan as a result of the qualifying event; or (3) the date on which you are informed, through the furnishing of either the SPD or the COBRA general notice, of the responsibility to notify the plan and the procedures for doing so.

Conversion Options

If your group health plan gives participants and beneficiaries whose coverage under the plan terminates the option to convert from group health coverage to an individual policy, the plan must give you the same option when your maximum period of continuation coverage ends. The conversion option must be offered not later than 180 days before your continuation coverage ends. The premium for an individual conversion policy may be more expensive than the premium of a group plan, and the conversion policy may provide a lower level of coverage. You are not entitled to the conversion option, however, if your continuation coverage is terminated before the end of the maximum period for which it was made available.

Summary of Qualifying Events, Qualified Beneficiaries, and Maximum Periods of Continuation Coverage

The following chart shows the specific qualifying events, the qualified beneficiaries who are entitled to elect continuation coverage, and the maximum period of continuation coverage that must be offered, based on the type of qualifying event. Note that an event is a qualifying event only if it would cause the qualified beneficiary to lose coverage under the plan.

Qualifying Event

Qualified Beneficiaries

Maximum Period of Continuation Coverage

Termination (for reasons other than gross misconduct) or reduction in hours of employment Employee
Spouse
Dependent Child
18 months(2)
Employee enrollment in Medicare Spouse
Dependent Child
36 months
Divorce or legal separation Spouse
Dependent Child
36 months
Death of employee Spouse
Dependent Child
36 months
Loss of “dependent child” status under the plan Dependent Child 36 months

Paying for Continuation Coverage

Your group health plan can require you to pay for COBRA continuation coverage. The amount charged to qualified beneficiaries cannot exceed 102 percent of the cost to the plan for similarly situated individuals covered under the plan who have not incurred a qualifying event. In determining COBRA premiums, the plan can include the costs paid by employees and the employer, plus an additional 2 percent for administrative costs.

For qualified beneficiaries receiving the 11-month disability extension, the COBRA premium for those additional months may be increased to 150 percent of the plan’s total cost of coverage for similarly situated individuals.

COBRA charges to qualified beneficiaries may be increased if the cost to the plan increases but generally must be fixed in advance of each 12-month premium cycle. The plan must allow you to pay the required 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 election notice should contain all of the information you need to understand the COBRA premiums you will have to pay, when they are due, and the consequences of late payment or nonpayment.

When you elect continuation coverage, you cannot be required to send any payment with your election form. You can be required, however, to make an initial premium payment within 45 days after the date of your COBRA election (that is the date you mail in your election form, if you use first-class mail). Failure to make any payment within that period of time could cause you to lose all COBRA rights. The plan can set premium due dates for successive periods of coverage (after your initial payment), but it must give you the option to make monthly payments, and it must give you a 30-day grace period for payment of any premium.

You should be aware that if you do not pay a premium by the first day of a period of coverage, but pay the premium within the grace period for that period of coverage, the plan has the option to cancel your coverage until payment is received and then reinstate the coverage retroactively back to the beginning of the period of coverage. Failure to make payment in full before the end of a grace period could cause you to lose all COBRA rights.

If the amount of a payment made to the plan is wrong, 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.

Health Coverage Tax Credit

Certain individuals may be eligible for a Federal income tax credit that can alleviate the financial burden of monthly COBRA premium payments. The Trade Adjustment Assistance Act of 2002 (Trade Act of 2002) created the Health Coverage Tax Credit (HCTC), an advanceable, refundable tax credit for up to 65 percent of the premiums paid for specified types of health insurance coverage (including COBRA continuation coverage). The HCTC is available to certain workers who lose their jobs due to the effects of international trade and who qualify for trade adjustment assistance (TAA), as well as to certain individuals who are receiving pension payments from the Pension Benefit Guaranty Corporation (PBGC). Individuals who are eligible for the HCTC may choose to have the amount of the credit paid on a monthly basis to their health coverage provider as it becomes due, or may claim the tax credit on their income tax returns at the end of the year.

The Trade Adjustment Assistance Health Coverage Improvement Act of 2009, enacted as part of the American Recovery and Reinvestment Act (ARRA), made changes to the HCTC.

The HCTC now pays a greater portion of your health insurance. The tax credit increased to 80 percent of qualified health insurance premiums. Newly-enrolled participants can request to receive a reimbursement or a credit on their HCTC accounts for qualified payments made while enrolling in the HCTC program.

The HCTC is available to your family members for a longer period of time beginning in January 2010. Your family may continue receiving the HCTC for up to 24 months after you, the primary eligible individual, enroll in Medicare, get divorced or die.

COBRA coverage also is temporarily extended for HCTC-eligible individuals. TAA-eligible individuals can keep COBRA coverage as long as they continue to be TAA-eligible.

PBGC-eligible individuals may be able to retain their COBRA coverage until death. The PBGC-eligible individual’s spouse and dependents can keep the coverage for an additional 24 months beyond that. However, note that this provision, like the rest of the Trade Adjustment Assistance Health Coverage Improvement Act, expires on December 31, 2010. At the time of this printing, these changes to the HCTC – including the new timeframes for extended benefits – are only valid through December 31, 2010.

Electing the COBRA premium reduction under ARRA disqualifies you for the HCTC. If you are eligible for the HCTC, which could be more valuable than the premium reduction, you will have received a notification from the IRS. If you are already receiving the COBRA premium reduction and wish to receive the HCTC, you can switch by opting out of the COBRA premium reduction program prior to registering for the HCTC program. You cannot receive the COBRA premium reduction and the HCTC in the same month.

For more information about the Health Coverage Tax Credit, call the HCTC Customer Contact Center at 1.866.628.HCTC (4282) (TDD/TTY: 1.866.626.HCTC (4282)). You may also visit the HCTC program Web site.

Coordination with Other Federal Benefit Laws

The Family and Medical Leave Act (FMLA) 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. Group health coverage that is provided under the FMLA during a family or medical leave is NOT COBRA continuation coverage, and taking 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 taking FMLA leave decides not to return to work and notifies an employer of his or her intent not to return to work.

In considering whether to elect continuation coverage, you should take into account that maintaining group health coverage affects your future rights to protections provided under HIPAA. HIPAA limits the length of any preexisting condition exclusion that a group health plan may impose and generally requires any exclusion period to be reduced by an individual’s number of days of creditable coverage that occurred without a break in coverage of 63 days or more. For this purpose, most health coverage, including COBRA coverage, is creditable coverage. Electing COBRA may help you avoid a 63-day break in coverage and, therefore, help you eliminate or shorten any future preexisting condition exclusion period that may be applied by a future group health plan, health insurance company, or HMO.

HIPAA also provides special enrollment rights upon the loss of group health plan coverage and rights to buy individual coverage that does not impose a preexisting condition exclusion period as described earlier.

To take advantage of some of HIPAA’s protections, individuals must show evidence of prior creditable coverage. The primary way individuals can evidence prior creditable coverage to reduce a preexisting condition exclusion period (or to gain other access to individual health coverage) is with a certificate of creditable coverage. HIPAA requires group health plans, health insurance companies, and HMOs to furnish a certificate of creditable coverage to an individual upon cessation of coverage. A certificate of creditable coverage must be provided automatically to individuals entitled to elect COBRA continuation coverage no later than when a notice is required to be provided for a qualifying event under COBRA, and to individuals who elected COBRA coverage, either within a reasonable time after learning that the COBRA coverage has ceased or within a reasonable time after the end of the grace period for payment of COBRA premiums. If you do not receive or you lose your certificate and cannot obtain another, you can still show prior coverage using other evidence of prior health coverage (for example, pay stubs, copies of premium payments, or other evidence of health care coverage). For more information about evidencing prior health coverage or your rights under HIPAA, contact EBSA toll free at 1-866-444-3272.

The Affordable Care Act (ACA) provides additional health protections. Except for references to the PCIPs, this publication does not reflect the passage of the Affordable Care Act. For more information, visit the Department of Labor’s Web page at http://www.dol.gov/ebsa/healthreform/. Also visit the Department of Health and Human Services (HHS) Web site at http://www.healthreform.gov.

Role of the Federal Government

COBRA continuation coverage laws are administered by several agencies. The Departments of Labor and Treasury have jurisdiction over private-sector 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 responsibility for COBRA is limited to the disclosure and notification requirements of COBRA. The Labor Department has issued regulations on the COBRA notice provisions. The Treasury Department has interpretive responsibility to define the required continuation coverage. The Internal Revenue Service, Department of the Treasury, has issued regulations on COBRA provisions relating to eligibility, coverage, and payment. The Departments of Labor and Treasury share jurisdiction for enforcement of these provisions.

Resources

If you need further information about COBRA, ERISA, or HIPAA, call toll free 1-866-444-3272 to reach the Employee Benefits Security Administration regional office nearest you, or visit the agency’s Web site.

For information about the interaction of COBRA and HIPAA, visit the EBSA Web site, go to “Publications and Reports,” and click on Your Health Plan and HIPAA…Making the Law Work for You.

The Centers for Medicare and Medicaid Services offer 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

Federal employees are covered by a Federal law similar to COBRA. Those employees should contact the personnel office serving their agency for more information on temporary extensions of health benefits.

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, Department of Labor, or visit the Wage and Hour Division’s Web page.

For questions about TAA, call the HCTC Customer Contact Center at 1.866.628.HCTC (4282) (TDD/TTY: 1.866.626.HCTC (4282)). You may also visit the HCTC Web site.

You do not need to stress about health insurance if you are leaving your job. COBRA will provide an opportunity to purchase your previous health insurance coverage for continuing coverage for up to 18 months.

Leave a Reply

Your email address will not be published. Required fields are marked *