COBRA Coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) was enacted in 1986 to provide eligible individuals the opportunity to continue group health coverage that might otherwise end due to certain life events.

COBRA allows certain former employees, retirees, spouses and dependent children to temporarily continue their employer-sponsored health coverage when coverage would otherwise be lost.

Individuals electing COBRA generally pay the full cost of coverage, including any portion previously paid by the employer, plus any applicable administrative fees. Although COBRA coverage is often more expensive than active employee coverage, it may be less costly than purchasing comparable individual health insurance.

COBRA generally applies to group health plans maintained by employers with 20 or more employees during the previous calendar year. The law applies to most private-sector employers as well as state and local government employers.

COBRA continuation coverage may include many of the same health benefits available to active employees, such as:

• Inpatient and outpatient hospital care
• Physician services
• Surgical and major medical benefits
• Prescription drug coverage
• Dental benefits
• Vision benefits

Life insurance coverage is not required to be continued under COBRA.

COBRA provides important protection by allowing eligible individuals and families to maintain health coverage during periods of transition, such as job loss, reduction in work hours or other qualifying events.

To qualify for COBRA continuation coverage, three basic requirements must be met: the health plan must be subject to COBRA, the individual must be a qualified beneficiary and a qualifying event must occur that causes a loss of coverage.

1. Plan Coverage

COBRA generally applies to group health plans maintained by employers that had 20 or more employees on more than 50% of their typical business days during the previous calendar year.

Both full-time and part-time employees are counted when determining whether an employer is subject to COBRA. Part-time employees are counted as a fraction of a full-time employee based on the number of hours worked.

2. Qualified Beneficiaries

A qualified beneficiary is generally an individual who was covered under the group health plan on the day before a qualifying event occurred. Qualified beneficiaries may include:

• Covered employees
• Spouses of covered employees
• Dependent children of covered employees
• Certain retired employees and their eligible dependents
• Children born to or placed for adoption with a covered employee during a COBRA coverage period
• Certain agents, independent contractors and directors participating in the group health plan

3. Qualifying Events

A qualifying event is an occurrence that causes an individual to lose group health coverage. The type of qualifying event determines who may be eligible for COBRA coverage and how long continuation coverage must be offered.

Common qualifying events include:

• Termination of employment (other than for gross misconduct)
• Reduction in work hours
• Divorce or legal separation
• Death of the covered employee
• Loss of dependent child status under the plan
• Certain events affecting retirees and their dependents

Employers may choose to offer continuation coverage for periods longer than those required by COBRA. Contact your Human Resources department or benefits administrator for specific eligibility and coverage details.

A qualifying event is an occurrence that causes a covered employee, spouse or dependent child to lose group health plan coverage. When a qualifying event occurs, eligible individuals may have the right to continue coverage under COBRA.

Qualified Beneficiaries

Qualified beneficiaries generally include employees, spouses and dependent children who were covered under the group health plan on the day before the qualifying event occurred. In certain situations, retired employees and their eligible dependents may also qualify.

Children born to or placed for adoption with a covered employee during a period of COBRA coverage are also considered qualified beneficiaries. Certain agents, independent contractors and directors who participate in the group health plan may qualify as well.

Qualifying Events for Employees

• Voluntary termination of employment (other than for gross misconduct)
• Involuntary termination of employment (other than for gross misconduct)
• Reduction in the employee's hours of employment

Qualifying Events for Spouses

• Termination of the covered employee's employment (other than for gross misconduct)
• Reduction in the covered employee's work hours
• The covered employee becoming entitled to Medicare
• Divorce or legal separation from the covered employee
• Death of the covered employee

Qualifying Events for Dependent Children

Dependent children may qualify for COBRA continuation coverage for the same reasons that apply to spouses, plus:

• Loss of dependent child status under the terms of the group health plan

The specific qualifying event determines who is eligible for COBRA coverage and how long continuation coverage may be available.

COBRA continuation coverage is available when a qualifying event causes a covered employee, spouse or dependent child to lose eligibility under a group health plan. Individuals who meet the eligibility requirements are known as qualified beneficiaries.

The type of qualifying event determines:

• Who is eligible to receive COBRA continuation coverage.
• The length of time COBRA coverage must be offered.
• The rights and protections available to qualified beneficiaries.

Common qualifying events include termination of employment, reduction in work hours, divorce or legal separation, death of the covered employee, Medicare entitlement and loss of dependent child status under the health plan.

COBRA generally requires group health plans to offer temporary continuation of health coverage that is substantially the same as the coverage available to similarly situated active employees and their families.

While COBRA establishes minimum continuation coverage requirements, employers may choose to provide longer periods of coverage than those required by federal law.

Qualified beneficiaries should review their COBRA election materials carefully and contact their benefits administrator with questions regarding eligibility, coverage periods and enrollment deadlines.

To be eligible for COBRA continuation coverage, you must have been enrolled in your employer's health plan while employed, and the health plan must continue to be available to active employees.

COBRA continuation coverage becomes available when a qualifying event occurs that would otherwise cause an individual to lose health coverage.

Qualified beneficiaries have the right to elect continuation coverage that is identical to the coverage provided under the plan to similarly situated active employees and their covered dependents.

Employers and plan administrators are responsible for determining and communicating each qualified beneficiary's rights regarding:

• COBRA election procedures
• Required notices and deadlines
• Available coverage options
• Length of continuation coverage
• Premium payment requirements

Qualified beneficiaries should carefully review all COBRA notices and election materials and contact the plan administrator with any questions about their rights or coverage options.

COBRA requires that covered employees, their spouses and newly eligible participants receive an initial general notice explaining their rights and responsibilities under the COBRA continuation coverage provisions.

This notice provides important information about:

• COBRA continuation coverage rights
• Qualifying events that may trigger COBRA eligibility
• Notice and election requirements
• Coverage continuation options
• Participant responsibilities under COBRA

Information regarding COBRA rights must also be included in the plan's Summary Plan Description (SPD), which serves as the primary communication document describing employee benefit plan provisions.

Under ERISA, plan administrators are required to provide participants with an SPD that includes information about plan benefits, participant rights and any material changes to the plan.

The SPD generally must be furnished:

• Within 90 days after an individual becomes a plan participant or beneficiary.
• Within 120 days after a new plan becomes subject to ERISA reporting and disclosure requirements.
• Whenever significant changes are made to plan provisions, through updated SPD materials or summaries of material modifications.

Employees and beneficiaries should review COBRA notices and Summary Plan Descriptions carefully to understand their rights, coverage options and responsibilities under the plan.

COBRA requires timely communication between employers, qualified beneficiaries and plan administrators when a qualifying event occurs. These notification requirements help ensure that individuals are informed of their continuation coverage rights and enrollment options.

Employer Responsibilities

Employers generally must notify the plan administrator within 30 days of the following qualifying events:

• Death of a covered employee
• Termination of employment
• Reduction in hours of employment
• Employee becoming entitled to Medicare

Qualified Beneficiary Responsibilities

Qualified beneficiaries are responsible for notifying the plan administrator within 60 days after:

• Divorce or legal separation
• Loss of dependent child status under the plan

Beneficiaries seeking a disability extension of COBRA coverage must notify the plan administrator within 60 days of receiving a Social Security disability determination and before the initial COBRA coverage period expires.

Beneficiaries must also notify the plan administrator within 30 days if the Social Security Administration determines that they are no longer disabled.

Plan Administrator Responsibilities

After receiving notice of a qualifying event, the plan administrator must provide eligible individuals with a COBRA Election Notice explaining their continuation coverage rights and enrollment options.

The election notice generally must be provided within 14 days after the plan administrator receives notice of the qualifying event.

Multi-Employer Plan Exceptions

Certain multi-employer plans may establish different notification timelines. In some cases, plan administrators rather than employers are responsible for determining whether a qualifying event such as termination of employment or reduction in hours has occurred.

Timely notice is important because failure to meet required deadlines may affect an individual's COBRA continuation coverage rights.

The COBRA election period is the time during which qualified beneficiaries may choose whether to continue health coverage under their employer's group health plan after a qualifying event occurs.

Qualified beneficiaries generally have 60 days to elect COBRA continuation coverage. The 60-day election period begins on the later of:

• The date coverage would otherwise be lost due to the qualifying event, or
• The date the COBRA election notice is provided.

If COBRA coverage is elected and the required premiums are paid, coverage is generally retroactive to the date coverage would otherwise have ended, ensuring no gap in coverage.

A covered employee or the employee's spouse may elect COBRA coverage on behalf of other qualified beneficiaries. However, each qualified beneficiary has an independent right to elect COBRA coverage.

For minor children, a parent or legal guardian may make the COBRA election on the child's behalf.

A qualified beneficiary who initially waives COBRA coverage may revoke that waiver at any time before the end of the 60-day election period. If the waiver is revoked, COBRA coverage may be elected at that time.

In such cases, continuation coverage generally begins on the date the waiver is revoked, subject to applicable plan rules and premium payment requirements.

The following examples illustrate how COBRA continuation coverage may apply in different situations:

Example 1: Termination of Employment

John participates in his employer's group health plan. When his employment is terminated for reasons other than gross misconduct, his health coverage ends. Because termination of employment is a qualifying event under COBRA, John may elect to continue his group health coverage for up to 18 months, provided he timely elects coverage and pays the required premiums.

Example 2: Divorce

David receives health coverage as a dependent under his spouse's employer-sponsored health plan. Following a divorce, he loses eligibility under the plan. Divorce is a qualifying event under COBRA, allowing David to continue coverage under the plan for up to 36 months if he elects COBRA coverage and pays the applicable premiums.

Example 3: Employer Not Subject to COBRA

Mary works for a small employer that maintains a group health plan but has fewer than 20 employees. When she leaves her job, she is not eligible for COBRA continuation coverage because the employer is not subject to COBRA requirements. COBRA generally applies only to employers that employed at least 20 employees during the preceding calendar year.

These examples demonstrate how eligibility for COBRA coverage depends on the type of qualifying event and whether the employer's health plan is subject to COBRA requirements.

Qualified beneficiaries who elect COBRA continuation coverage must generally be offered the same health benefits they were receiving immediately before the qualifying event occurred.

For example, if an individual was enrolled in medical, hospital, prescription drug, dental and vision coverage prior to losing eligibility, they may have the right to continue those same benefits under COBRA.

Core and Non-Core Benefits

COBRA distinguishes between core and non-core health benefits:

• Core Benefits: Medical, hospital, prescription drug and other major health benefits provided under the plan.
• Non-Core Benefits: Dental and vision benefits, unless required by law, in which case they become core benefits.

If a health plan offers both core and non-core benefits, qualified beneficiaries may generally choose to continue the entire package of coverage or elect only the core benefits.

Employers are not generally required to offer non-core benefits separately unless those benefits were the only coverage provided under a particular plan before the qualifying event.

Changes in Coverage

COBRA beneficiaries are subject to the same plan changes that apply to active employees. If benefits, premiums or coverage provisions change for active participants, those changes generally apply to individuals receiving COBRA continuation coverage as well.

COBRA participants may also have the opportunity to change coverage options during the plan's annual open enrollment period, just as active employees do.

Continuation coverage is designed to provide access to substantially the same health benefits available to similarly situated active employees and their eligible dependents.

Individuals who elect COBRA continuation coverage may be required to pay the full cost of their health coverage. The premium generally may not exceed 102% of the total cost of coverage for similarly situated individuals who have not experienced a qualifying event.

This amount includes:

• The portion of the premium previously paid by the employee.
• The portion previously paid by the employer.
• An additional 2% administrative fee.

Disability Extension Premiums

Beneficiaries who qualify for an additional 11-month disability extension beyond the initial 18 months of COBRA coverage may be charged up to 150% of the total cost of coverage during the extension period.

Premium Payment Requirements

The initial COBRA premium payment must be made within 45 days after the date COBRA coverage is elected. This payment must generally cover the entire period of coverage retroactive to the date coverage was lost due to the qualifying event.

Subsequent premium payments are due according to the schedule established by the plan. Plans must provide at least a 30-day grace period for each premium payment.

COBRA participants may request to make premium payments on a monthly basis if permitted under the plan.

Important Payment Rules

• Premium rates may increase if the overall cost of coverage increases.
• Premium amounts generally must be established in advance for each coverage period.
• Plans are not required to send monthly premium reminders.
• Failure to pay premiums within the applicable deadlines may result in termination of COBRA coverage.

Additional Plan Costs

COBRA beneficiaries remain subject to the same plan provisions as active participants, including deductibles, copayments, coinsurance, out-of-pocket maximums and any other applicable benefit limitations under the health plan.

The Family and Medical Leave Act (FMLA) requires employers to maintain group health plan coverage for eligible employees during approved FMLA leave under the same conditions that would apply if the employee had continued working.

Health coverage maintained during FMLA leave is not considered COBRA coverage, and taking FMLA leave is not, by itself, a COBRA qualifying event.

During an approved FMLA leave, employees generally continue to receive the same group health benefits available to active employees, provided they continue to pay any required employee share of the premium.

A COBRA qualifying event may occur if the employer's obligation to maintain health coverage under FMLA ends. For example, a qualifying event may arise if:

• An employee informs the employer that they do not intend to return to work after FMLA leave.
• An employee fails to return to work after exhausting FMLA leave rights.
• Group health coverage would otherwise terminate following the end of FMLA protection.

When a COBRA qualifying event occurs, eligible employees and dependents may be offered the opportunity to continue health coverage under COBRA continuation provisions.

Employees with questions regarding FMLA rights, continuation of health coverage or COBRA eligibility should contact their Human Resources department, benefits administrator or the U.S. Department of Labor for additional information.

If you lose employer-sponsored health coverage, you may have other health insurance options available through the Health Insurance Marketplace. The Marketplace allows individuals and families to compare health plans and determine whether they qualify for financial assistance.

Depending on your household income and eligibility, you may qualify for:

• Premium tax credits that can reduce your monthly insurance costs.
• Lower out-of-pocket expenses, including deductibles and copayments.
• Special enrollment opportunities outside the annual enrollment period.

Eligibility for COBRA continuation coverage does not prevent you from exploring Marketplace coverage options. In some cases, Marketplace coverage may be more affordable than COBRA continuation coverage.

You may also qualify for a special enrollment opportunity under another group health plan, such as a spouse's employer-sponsored plan, if you request enrollment within the applicable enrollment period.

Before making a decision, compare the costs, benefits, provider networks and coverage options available through COBRA, the Marketplace and any other available group health plans.

For more information about Marketplace coverage options, visit:
www.healthcare.gov
or call 1-800-318-2596.

If you have questions regarding your COBRA continuation coverage rights, contact your Plan Administrator or Human Resources department.

COBRA establishes minimum periods during which qualified beneficiaries may continue their group health coverage following a qualifying event. Some health plans may choose to offer continuation coverage beyond the periods required by federal law.

Standard Coverage Periods

• 18 Months: Generally available when coverage is lost due to termination of employment (other than for gross misconduct) or a reduction in work hours.
• 36 Months: May be available for certain qualifying events such as divorce, legal separation, death of the covered employee, Medicare entitlement, loss of dependent child status, or a second qualifying event occurring during an initial COBRA coverage period.

Disability Extension

If a qualified beneficiary is determined by the Social Security Administration to be disabled at the time of, or within the applicable period following, a termination of employment or reduction in work hours, COBRA coverage may be extended from 18 months to a maximum of 29 months, provided the plan administrator is notified in a timely manner.

When COBRA Coverage May End

COBRA continuation coverage may end before the maximum coverage period expires if:

• The maximum coverage period is reached.
• Required premiums are not paid on time.
• The employer no longer maintains any group health plan.
• The beneficiary obtains coverage under another group health plan that does not impose pre-existing condition limitations.
• The beneficiary becomes entitled to Medicare benefits.

Conversion Coverage Option

Some health plans offer the option to convert group health coverage to an individual health insurance policy when COBRA coverage ends. If available, beneficiaries generally must be given the opportunity to enroll in a conversion policy within 180 days before COBRA coverage terminates.

Conversion coverage premiums are typically not offered at group rates and may be higher than COBRA premiums. Conversion rights may not be available if COBRA coverage is terminated before the maximum continuation period ends.

Contact your Plan Administrator or Human Resources department for information regarding COBRA coverage periods, disability extensions and available conversion options.

Group health plans must establish written procedures for filing benefit claims and appealing claim denials. These procedures are typically described in the plan's Summary Plan Description (SPD).

Filing a Claim

To request benefits, participants should submit a written claim to the individual or entity designated to administer the health plan, such as the employer, plan administrator or claims administrator.

Claim Denials

If a claim is denied, the plan must generally provide written notice of the denial within 90 days after the claim is filed.

The denial notice should include:

• The specific reason(s) for the denial.
• Any additional information needed to support the claim.
• Instructions on how to appeal the decision.

Appealing a Denial

Participants generally have 60 days from the date of the denial notice to submit an appeal.

A decision on the appeal must generally be provided within 60 days after the appeal is received, unless:

• The plan provides for a special hearing process, or
• The appeal decision must be made by a committee or group that meets periodically.

Obtaining Plan Information

Complete plan documents, including claims and appeal procedures, are available from your employer, Human Resources department or plan administrator.

Reasonable charges may apply for copies of plan documents, typically up to 25 cents per page.

Contact your Plan Administrator for additional information regarding claim filing requirements, appeals and access to plan documents.

Several federal agencies share responsibility for administering and enforcing COBRA continuation coverage requirements, depending on the type of health plan involved.

U.S. Department of Labor

The U.S. Department of Labor oversees COBRA disclosure and notification requirements for private-sector employer-sponsored health plans. This includes guidance related to participant notices, election rights and continuation coverage information.

Questions regarding COBRA election rights or notification requirements for private-sector plans may be directed to the Department of Labor's Employee Benefits Security Administration (EBSA).

Internal Revenue Service (IRS)

The Internal Revenue Service (IRS), a division of the U.S. Department of the Treasury, is responsible for regulations concerning COBRA eligibility requirements, premium calculations and related tax provisions.

The Department of Labor and the IRS share responsibility for enforcement of COBRA requirements affecting private-sector health plans.

U.S. Department of Health and Human Services

Through the Public Health Service Act, the U.S. Department of Health and Human Services oversees continuation coverage requirements for certain state and local government health plans.

Public-sector employees may obtain additional information regarding continuation coverage rights through the appropriate state or local governmental benefits office or the Department of Health and Human Services.

Federal Employees

Federal employees are generally covered under separate laws that provide temporary continuation of health benefits similar to COBRA. Employees of the federal government should contact their agency's personnel or benefits office for information regarding continuation coverage options.

If you have questions regarding COBRA rights, eligibility or continuation coverage requirements, contact your Plan Administrator, Human Resources department or the appropriate federal agency for assistance.

Rising healthcare costs have made health insurance an essential benefit for individuals and families. COBRA provides an important safeguard by allowing eligible individuals to temporarily continue their employer-sponsored health coverage when it might otherwise be lost.

Understanding your rights and responsibilities under COBRA can help you make informed decisions about maintaining health coverage during periods of transition, such as job loss, reduced work hours or other qualifying life events.

Employees and family members should take an active role in managing their benefits by reviewing plan materials, understanding enrollment deadlines and staying informed about available coverage options.

Your health plan's Summary Plan Description (SPD) and other benefit materials are valuable resources for understanding eligibility requirements, coverage provisions and continuation rights.

Because health plans and applicable laws may change over time, it is important to periodically review your benefit information and contact your Human Resources department or Plan Administrator with any questions regarding coverage, eligibility or plan changes.

Staying informed about your health benefits can help ensure that you and your family maintain access to the healthcare coverage you need.