COBRA Continuation Coverage – Which Plans Are Subject to COBRA?
COBRA Continuation Coverage
One of the most common forms of COBRA noncompliance occurs when employers, that are subject to Federal COBRA or State Continuation*, if applicable, don’t offer the proper continuation coverage for health plans subject to COBRA. Many employers mistakenly think COBRA only applies to medical plans, which is what most people think of when they hear “health insurance”. In reality, most group health plans are subject to COBRA and continuation must be offered when a qualifying event results in a loss of a coverage. Failure to recognize COBRA qualified plans is an easy way to fall out of compliance and risk litigation and fines.
What exactly is a group health plan?
- A plan, fund or program;
- Established or maintained by an employer;
- Provides some type of medical care
Examples of group health plans subject to COBRA include**:
– Prescription Drug
– Health Flexible Spending Accounts
– Health Reimbursement Accounts
– Substance Abuse
– Mental Health
Examples of plans that are NOT subject to COBRA include**:
– Life Insurance
– Short-term Disability
– Long-term Disability
– Accidental Death & Dismemberment
– Dependent Care FSA
– Health Savings Account Contributions
– Medical Savings Account
– Workers’ Compensation
– Long-term Care Plan
– On-site Gyms
As you can see from the eligible and ineligible examples, a plan needs to be tied to health care to qualify for COBRA continuation coverage. This distinction helps identify the types of plans that may or may not be subject to COBRA, depending on how the plan is written.
Employee Assistance Programs (EAP)
If the EAP is offering more than a referral, it may be subject to COBRA. EAPs that have a provider network that offers counseling services would be subject to COBRA because the plan itself is providing health care.
Employers often offer incentives for employees who complete an annual biometric screening. Employers do not have to extend a premium discount to COBRA participants if that is the employee incentive. However, if the incentive is built inside of the plan, it is subject to COBRA. For example, some employers incentivize completed biometric screenings by offering a discounted deductible. That type of wellness program is subject to COBRA.
Often Teladoc is included or wrapped into the health plan, but if it is a standalone plan and employees can call or email to give symptoms and get treatment/prescriptions, it is COBRA eligible.
Supplemental Health Insurance (e.g., Cancer Insurance)
It is considered a group health plan if the plan reimburses doctors and providers directly for treatment, but not if the plan provides a cash benefit.
** This is not an exhaustive list of COBRA-affected and unaffected plans. Employers should be aware of their specific plans and how they relate to COBRA.
*Employers subject to COBRA, unless exempted, are those that had 20 or more employees on 50% of their typical business days during the previous calendar year. Exempted employers are Church plans and the Federal Government plans. Also be sure you verify if you have less than 20 employees if you are subject to State Continuation coverage.
BASIC COBRA Administration
Employers can minimize their compliance risk with BASIC COBRA Administration. Our industry expert COBRA Account Managers ensure your plans comply with all COBRA regulations. They take the burden off your staff by fielding calls and emails from ex-employees and their dependents, all while managing the Department of Labor’s COBRA notification time frame guidelines! Find out how BASIC can reduce your liability and take the pressure off your HR department. Request a proposal today!