With summer break upon us, most of us are reminded that being home has its perks. Think back to your spring break vacation … Maybe you were stuck at the airport with your kids when their devices ran out of power. Or, maybe you spent hours in the car taking direction from a computer-generated voice telling you to turn in 0.5 miles. Every year, we crave an escape from our daily routines. Then, halfway through our vacations, we yearn for the comforts of home.
Now, take a moment to equate your last family travel experience with the current state of health care regulation. The Affordable Care Act (ACA) may have brought the change that some were craving, but the environment has now become a bit chaotic. Instead of craving change, we want reliable routines.
Fortunately, we still have COBRA. COBRA feels comfortable, sort of like home. With COBRA, you know what to expect. You mostly know the rules and how they will be applied. At one time, you might have been overwhelmed by COBRA concepts like qualifying events, applicable premiums, or election notices. However, now that you’ve made it through ACA compliance, COBRA administration is as easy as pie.
Now, you are COBRA-confident. You’ve got this. And, even if you don’t, the basic refresher below will bring it all into focus …
What is COBRA?
COBRA is the continuation of group health insurance by a qualified beneficiary who loses coverage due to a qualifying event. The qualified beneficiary must pay 102% of the cost of coverage.
What Plans are Subject to COBRA?
COBRA applies to group health plans that provide medical care and are maintained by an employer. Examples of plans subject to COBRA include health plans; dental and vision plans; cancer (disease specific) policies unless they are completely voluntary, employee pay-all; prescription drug plans; health FSAs; HRAs; drug or alcohol treatment programs; wellness programs that offer physical exams, cholesterol screening, flu shots and nutrition counseling.
Who is Eligible to Elect COBRA?
Qualified beneficiaries who are covered by a group health plan immediately before a qualifying event are eligible to elect COBRA. Qualified beneficiaries include a covered employee (including retirees, independent contractors, partners of a partnership – basically anyone provided coverage because they are performing or have performed services for the employer). Qualified beneficiaries also include the spouse and dependent child of a covered employee.
What Triggers COBRA?
COBRA kicks in upon the occurrence of a qualifying event if that qualifying event causes a loss of coverage under the group health plan. There are seven qualifying events: (1) termination of the covered employee’s employment (other than for gross misconduct); (2) reduction in the covered employee’s hours of employment; (3) death of the covered employee; (4) divorce or legal separation from the covered employee; (5) ceasing to be a dependent child under the terms of the plan; (6) the covered employee becoming entitled to Medicare; and (7) the employer’s bankruptcy (only for retiree plans).
Remember, the qualifying event must cause a loss of coverage. A loss of group health plan coverage means “to cease to be covered under the same terms and conditions as in effect immediately before the qualifying event.” This encompasses much more than simply losing group coverage entirely. For example, suppose a company has two plans for employees at different locations and the premiums are higher at one location. If an employee is transferred to the location with the more expensive plan and no longer qualifies under his or her current plan, the qualified beneficiaries have a COBRA right under the old plan.
What is the Maximum Duration of COBRA Coverage?
Generally, COBRA lasts for up to 18 months if the qualifying event is a termination of employment or a reduction of hours. COBRA can last for up to 36 months upon the death of an employee, divorce or legal separation, child’s loss of dependent status, or an employee’s entitlement to Medicare. COBRA for a disabled qualified beneficiary can extend up to 29 months. Finally, retiree coverage that terminates due to the employer’s bankruptcy can lead to COBRA for the life of the retiree plus 36 months for the spouse after the retiree’s death. If the retiree is not living when the bankruptcy occurs, but the surviving spouse is covered by the plan, the spouse gets COBRA for life. Keep in mind, there are many ways that COBRA can end early such as due to nonpayment of premiums.
What COBRA Notices and other Plan Disclosures are Mandatory?
Notification drives COBRA. Some of the notices and communications that are mandatory include: the initial (General) notice; the election notice; the notice of unavailability of COBRA coverage; the notice of early termination; the notice of COBRA premiums short by an insignificant amount; open enrollment materials; individual conversion policy notices; summary plan descriptions; summary of benefits and coverage; summary of material modifications, and; a notice of change in COBRA premiums.
Just the Beginning
This basic refresher gets you through the front door, and comfortable with daily COBRA routines. But like any home, COBRA has its own nooks and crannies. If you venture into the basement or attic, you may encounter some scary topics including premium calculations, coverage terminations in anticipation of qualifying events, deadline calculations, notice contents, and let’s not forget Medicare! When these things come up, don’t go it alone. Use competent COBRA advisors to light the way.
This article was reprinted from the May 2017 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.