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The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) can help you continue your health care coverage if you leave your
company. COBRA requires most employers of 20 or more employees with a group health plan to offer a continuation of group insurance coverage for employees and their dependents if an employee leaves the company or if another “qualifying event” occurs, such as a family member becoming ineligible for health care coverage under the plan.
The cost of the continued coverage under COBRA is generally paid entirely by the employee or dependent at or near the employer’s group rate. Your employer will no longer pay a share of the health insurance costs. However, under recent economic stimulus regulations, you may be eligible for a Federal government subsidy of up to 65-percent of the COBRA premium for a limited period. Your state’s Department of Labor or Insurance Department, or your employer’s human resources
department can help answer specific questions about your COBRA coverage. Here are some important facts and helpful resources if you or someone in your family needs or may soon need COBRA coverage.
Coverage and eligibility
x The following types of group health care plans are covered under COBRA:
- medical insurance
- dental, vision, and prescription drug plans - drug and alcohol treatment programs
- employee assistance programs (EAPs) that provide direct counseling services - on-site health care facilities
x A “qualified beneficiary” is a covered employee, spouse, or dependent enrolled in an employer-sponsored care plan the day before a “qualifying event.”
Overview
Facts about COBRA coverage, eligibility, and rights and responsibilities of COBRA participants.
x Coverage and eligibility x Qualifying events and
length of coverage x Responsibilities of COBRA
participants x Rights of COBRA
participants x Costs for COBRA
coverage
x COBRA and the American Recovery and
Reinvestment Act of 2009 x COBRA and the Family
and Medical Leave Act x COBRA and medical
benefit conversion from group plan to individual plan
x COBRA and HIPAA x State COBRA laws
Qualifying events and length of coverage
x A qualifying event is something that results in the loss of a beneficiary’s coverage under an employer-sponsored care plan.
x Qualifying events can happen to the employee directly or to a dependent or family member covered under the employee’s plan.
x How long you may be covered under COBRA is determined by the type of qualifying event. Depending on the reason for COBRA coverage, the employee or dependent will generally have access to coverage for 18, 29, or 36 months.
COBRA doesn’t prohibit plans from offering coverage for longer periods, so, in some cases you may be able to obtain coverage for a longer time.
18-month events (apply to employees)
x Any voluntary or involuntary termination other than for gross misconduct.
x Reduction in hours to below the minimum required to participate in the employer’s plan.
x Labor strike.
x Leave of absence.
x Military leave.
29-month events (apply to disabled employees, covered spouses, and dependents)
x Any qualified beneficiary who has a ruling from the Social Security Administration that he or she became disabled within the first 60 days of COBRA coverage.
36-month events (apply to covered spouses and dependents)
x Employee’s death.x Employee’s entitlement to or activation of Medicare, resulting in the family’s exclusion from the employer’s plan.
x Divorce or legal separation from a covered employee.
x Family member no longer considered a dependent under the employer’s plan (for example, a child who is no longer a full-time college student or who is above the employer’s coverage age for dependents).
x If a 36-month event occurs during an 18-month event, COBRA benefits may be extended to the thirty-sixth month from the original event date for dependents and spouses only.
If you are a divorced or legally separated spouse and have questions about your coverage or eligibility, call the health plan administrator or the Employee Benefits Security Administration at 866-444-EBSA (866-444-3272), or visit www.dol.gov/ebsa.
Responsibilities of COBRA participants
x To participate in a COBRA plan, you or a qualified beneficiary must notify your COBRA plan administrator within 60 days of a status change (such as divorce, legal separation, death, or dependent ineligibility). In some other circumstances (such as death of the covered employee, termination of the covered employee, reduction in the covered employee’s hours, Medicare eligibility, or
commencement of bankruptcy proceedings by the employer), the employer must notify the plan administrator within 30 days.
x Upon receiving a status change notification from an employee, the plan
administrator has 14 days to send a COBRA notice to the employee’s home, with information about the right to elect COBRA.
x You or your qualified beneficiaries have 60 days from the date of the notification of your rights or the date that your benefits terminate -- whichever is later -- to choose COBRA benefits (this is the “election period”).
x The employee or qualified beneficiary can change his or her mind at any time during this 60-day election period.
x Qualified beneficiaries or employees must make monthly payments for their COBRA benefits. (The due date every month is established from the first day of the coverage period.) The plan is not required to send you monthly premium notices, so it is your responsibility to remember and send your payments in on time.
Rights of COBRA participants
x COBRA participants have the same rights and access to coverage as active employees and their beneficiaries.
x If employees are allowed to add new spouses or dependents or are offered an opportunity to change coverage plans, COBRA participants must have the same opportunity to make changes.
x If coverage changes are made to the plan for employees, those changes apply to COBRA participants as well, even if the new coverage is not as good.
Medicare and COBRA
x Under federal COBRA law, eligibility for COBRA ends when Medicare eligibility starts. This means that if you are receiving health insurance under COBRA, it is important to enroll in Medicare Parts A and B when you become
eligible. If you have Medicare first and become eligible for COBRA later, you may take COBRA as secondary insurance.
x It is important to enroll in Medicare when you first become eligible. Otherwise, you will be required to pay premium penalties and wait for the next general enrollment period. This could leave you without coverage because COBRA coverage stops when you become eligible for Medicare, regardless of whether you enroll.
x If members of your family are covered by your former employer but are not eligible for Medicare, their COBRA coverage continues regardless of your Medicare eligibility.
Costs for COBRA coverage
x The rate for coverage as a result of 18- and 36-month events may not exceed the employer’s direct costs for coverage, plus 2 percent for administrative costs.
x The rate for coverage as a result of 29-month events, for the nineteenth through the twenty-ninth months, may be up to 150 percent of the applicable employer’s premium.
COBRA and the American Recovery and Reinvestment Act of 2009, as amended
Under new federal economic stimulus regulations -- the American Recovery and Reinvestment Act of 2009, as amended by the Department of Defense
Appropriations Act, 2010 (2010 DOD Act) on December 19, 2009, and the Temporary Extension Act of 2010 on March 2, 2010 -- if you were involuntarily terminated during the period from September 1, 2008 through March 31, 2010, you may be eligible for up to a 65-percent subsidy for your COBRA costs. The premium reduction applies to periods of health coverage that began on or after February 17, 2009, and lasts for up to fifteen months. The subsidy is limited to individuals with an annual adjusted gross income of up to $145,000 (or $290,000 for couples filing jointly).
If you were involuntarily terminated during the period from September 1, 2008 through March 31, 2010, your plan administrator will give you a notice
informing you that you may be eligible for the subsidy. To get the subsidy, you must respond to the notice within 60 days. If you already have COBRA, continue paying your premium as billed. You will receive a refund or credit if you qualify for the subsidy. If you were terminated during that time period and did not initially elect COBRA, or if you elected COBRA and later discontinued it, you will be notified that you may be eligible for this new subsidy program. When you receive your new notice, you will have 60 days to elect coverage. This special election period does not extend the period of your COBRA continuation coverage beyond the original maximum period.
For more information, visit the Department of Labor Web site at www.dol.gov/ebsa/COBRA.html.
COBRA and the Family and Medical Leave Act
x During a leave covered by the Family and Medical Leave Act (FMLA), the employer and employee must maintain the employee’s health benefits, under the same terms as if the employee were continuing to work.
x FMLA leave is not a COBRA qualifying event. However, a COBRA qualifying event may occur when an employer’s obligation to maintain health benefits under FMLA ceases, such as when an employee gives notice of his or her intent not to return to work.
COBRA and medical benefit conversion from group plan to individual plan
x COBRA participants must be notified if an insurer offers a conversion policy, allowing them to change from a group health insurance plan to an individual insurance plan.
x This notice must be sent by either the insurance company or the employer during the last 180 days of the COBRA coverage period.
COBRA and HIPAA
When you are deciding whether to continue your health coverage under COBRA, keep in mind that a decision not to elect COBRA coverage may affect the amount of time that must pass before you can have coverage for a pre- existing condition under a new health plan. Under the Health Insurance
Portability and Accountability Act (HIPAA), if you have a pre-existing condition and are without insurance coverage for a significant break -- generally, 63 days -- you may have to wait for up to 18 months for coverage under a new health plan.
State laws may extend the 63-day period.
State COBRA laws
Your state may also have its own laws related to COBRA that provide coverage for people who are not covered under the federal COBRA law (for example, people who work for an employer with fewer than 20 employees, or the domestic partners of employees). State laws may be called “mini-COBRA” laws or “state continuation” laws. You can get information about mini-COBRA laws from:
x Your state department of insurance. The site for the National Association of
Insurance Commissioners at www.naic.org/state_web_map.htm has links to all state departments of insurance.
x Your state department of labor. You’ll find contact information for the departments on the U.S. Department of Labor’s site at www.dol.gov/whd/contacts/state_of.htm.
For more information on COBRA, visit the U.S. Department of Labor’s page at www.dol.gov/dol/topic/health-plans/cobra.htm to see how the law may affect you.
Remember, too, that the program that provided this publication has other helpful resources on work and personal concerns.
Written with the help of David Rivers, J.D., an attorney and a legal consultant at Ceridian Corporation and Joy Elbaum, J.D., an attorney and legal consultant to Ceridian Corporation.
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