COBRA CONUNDRUMS reprinted from the October, 2013 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.

Dear COBRA Bob,

With all the Affordable Care Act uncertainty, I’ve decided to focus more effort on voluntary benefit products. However, I’m not sure how COBRA works in the voluntary arena. Can you enlighten me?

 - Perplexed in Peoria

Dear Perplexed,

Great question. I’ve noticed that both employers and brokers seem to be showing more interest in voluntary benefits lately and there’s a great deal of confusion about how COBRA applies.

COBRA’s plan applicability has expanded since the law was first passed in 1986. Initially, only medical plans qualified. However, in 1996, dental plans were added, and in 2001 the qualifying plan definition was expanded to “health care,” which covers diagnosis, treatment and cures. With the new definition, COBRA began applying to other types of plans such as flexible spending, wellness and cancer care. 

How do you know if COBRA applies to a specific plan?

If you’re wondering if COBRA applies to a plan, use the following four-part test:

1.  Is the company big enough to worry about COBRA? COBRA applies to companies that employ at least 20 people on more than 50 percent of their typical business days.

2.  Does the plan qualify as a “group plan” under the Employee Retirement Income Security Act (ERISA)? A group plan is a plan, fund or program that is maintained or established by the employer for the purpose of providing health  care. Note that an employer-sponsored plan can include voluntary plans even when the employee pays all of the premium and the coverage is portable. Health Reimbursement Accounts (HRAs) are considered group plans.

3.  Does the plan in question fall under the “health care” category? Health care includes “the diagnosis, cure, mitigation, treatment or prevention of disease or any undertaking for the purpose of affecting any structure or function of the body.” With this definition in mind, COBRA almost always applies to cancer, gap, critical illness and dental plans.

4.  Could the plan qualify for ERISA Safe Harbor? Some voluntary health care plans with very minimal employee involvement may fall under the ERISA Safe Harbor, and therefore be exempt from COBRA. This is a gray area in which you should never make assumptions. If you think a plan may qualify for ERISA Safe Harbor, ask the carrier and employer’s legal counsel for their opinions. The employer should clearly document their reasons for not providing COBRA in case they are ever called into question later. One test that may be applied relates to plan cost: Is the plan available at the same cost to the individuals (outside the organization) as it is to those who are employees of the organization?

Which plans are definitely NOT subject to COBRA?

Plans that do not fall under the health care umbrella are not subject to COBRA. Therefore, COBRA does not apply to employer-paid or voluntary life insurance, disability insurance, long-term care insurance and legal assistance programs. Also, COBRA typically does not apply to the bank account side of Health Savings Accounts (HSAs) because the bank account is in the name of the individual rather than the employer. Please note that the group-sponsored high deductible medical plan attached to the HSA is definitely subject to COBRA.

To sum things up, COBRA applies to most health care related voluntary plans. When in doubt, check with the plan’s carrier.

Do your best,