COBRA – Know your Rights and Avoid Being Bitten by the Snake

Terminated employees generally lose their COBRA health care continuation coverage for one of two reasons: they fail to timely elect COBRA coverage within 60 days, or they fail to timely make required premium payments. The rights and obligations of COBRA qualified beneficiaries are described below.

COBRA is a federal statute that is codified at 29 U.S.C. §§ 1161-1169. The acronym stands for The Consolidated Omnibus Budget Reconciliation Act. The health benefit provisions of the law amend the Employee Retirement Income Security Act, the Internal Revenue Code, and the Public Health Service Act to require employer-sponsored group health plans to provide temporary continuation of group health coverage that would otherwise be terminated due to a “qualifying event.”

COBRA requires continuation coverage to be offered to “qualified beneficiaries” – covered employees, their spouses, their former spouses, and dependent children. COBRA continuation coverage is often more expensive than the amount that active employees are required to pay for group health coverage. That is because employers usually pay all or part of the cost of health coverage for active employees. The entire cost may be charged to individuals who receive continuation coverage.

COBRA applies to all health coverage plans maintained by employers with 20 or more employees or by state and local governments. Excluded are plans sponsored by the federal government or by churches and church-related organizations.

Electing COBRA continuation coverage is not mandatory. Persons may elect to forego COBRA continuation coverage and enroll in a spouse’s group health plan, purchase health coverage in the market (including the Health Insurance Marketplace established under the Affordable Care Act), enroll in Medicare or Medicaid if such programs are available, or forego health insurance.

Eligibility for continuation coverage is triggered by a “qualifying event.” Qualifying events for an employee include the loss of employer-sponsored group health coverage due to (1) termination of employment other than for gross misconduct, or (2) reduction in the hours of employment. Qualifying Events for the spouse or dependent child of a covered employee include the covered employee’s loss of employee’s employer-sponsored health coverage, the covered employee becoming entitled to Medicare, divorce or legal separation of the spouse from the covered employee, and the death of the covered employee. Qualified beneficiary status may also be available to retired employees and their spouses and dependent children in the case of the bankruptcy of the employer sponsoring the plan.

COBRA Notices

Group health plans must provide covered employees and their spouses a summary plan description and a general notice that describe their COBRA rights within 90 days after the employee first becomes a participant under the health plan. The employer must notify the health plan within 30 days of a qualifying event if the qualifying event is the employee’s termination, reduction of hours, death, entitlement to Medicare, or the bankruptcy of the employer. The covered employee or one of the other qualified beneficiaries must notify the plan if the qualifying event is divorce, legal separation or loss of a child’s dependent status under the plan. The plan can set a time limit on giving this notice, but it cannot be shorter than 60 days.

When the plan receives notice of a qualifying event, it must give the qualified beneficiaries notice of their rights to elect COBRA continuation coverage and instructions on how to make the election. This notice must be provided within 14 days after the plan receives notice of the qualifying event. Notices must be given separately to the former employee and the spouse. Each qualified beneficiary must be given at least 60 days from the later of the date the person was provided the election notice or the date the person would lose coverage to chose continuation coverage. Each beneficiary may separately whether to elect coverage. Parents may elect on behalf of dependent children.

What Coverage is Required by COBRA

Coverage must be identical to the coverage currently available under the plan to similarly situated active employees and their families. However, any change made to the plan’s terms that apply to active employees and their families may also apply to qualified beneficiaries covered under COBRA continuation coverage.

Duration of COBRA Coverage

Generally, an employer is required to provide continuation coverage for 18 months from the qualifying event. However, coverage may be required for 36 months in certain circumstances. If the qualifying event is the termination of employment or reduction in hours, and the employee becomes eligible for Medicare less than 18 months before the qualifying event, COBRA coverage for the employee’s spouse and dependents continues until 36 months after the date the employee becomes entitled to Medicare. In addition, if one qualified beneficiary in a family is found to be disabled by the Security Administration, coverage may be extended for all qualified beneficiaries for 11 months for a total of 29 months. In such cases, the plan may charge qualified beneficiaries an increased premium, up to 150% of the cost of coverage, during the 11-month extension period.

Termination of COBRA Coverage

COBRA coverage may be terminated early for the following reasons:

Non-payment of premiums on a timely basis.
The employer ceases to maintain any group health plan.
The qualified beneficiary begins coverage under another group health plan after electing continuation coverage.
A qualified beneficiary becomes entitled to Medicare after electing coverage.
A qualified beneficiary engages in conduct that would justify the plan in terminated coverage.

You Must Pay

A plan may charge qualified beneficiaries up to 102% of the cost of the plan coverage. Qualified beneficiaries who are receiving coverage under the 11-month disability extension may have their premium increased to 150% of the plan’s total cost for active employees. The plan election notice should contain all information the qualified beneficiary needs to understand the COBRA premiums the beneficiary will have to pay, when payments are due, and the consequences for non-payment.

A qualified beneficiary cannot be required to send any payment with the election form, but the beneficiary may be required to make an initial premium payment within 45 days of the date the election form is submitted. Failure to make the required premium payment with 45 days will result in the beneficiary losing all COBRA rights. The plan may set premium due dates for successive periods of coverage, after the initial payment, and must provide the option to make monthly payments and must provide a 30-day grace period for payment of any premium. With one exception, the plan is not required to send invoices or reminder notices for the subsequent payments, and the failure to make payment in full before the end of the grace period will result in the qualifying beneficiary losing all COBRA rights. However, if the amount of a payment to the plan is incorrect but is not significantly less than the amount due, the plan is required to notify the beneficiary of the deficiency and grant a reasonable period (30 days is considered reasonable) to pay the difference.

Additional information concerning COBRA coverage may be found in the U.S. Department of Labor’s Frequently Asked Questions.

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Whiteman Law Firm specializes in cases involving claims for employee benefits. These cases typically involve application of a federal law, the Employee Retirement Income Security Act of 1974, known by the acronym ERISA, and are usually resolved through the benefit plan’s appeal process or federal court. We have helped hundreds of individuals with their claims for short-term and long-term disability insurance and other employee benefits.

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