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What is COBRA?

COBRA is not new insurance – it is a law that allows a covered individual to continue using an employer’s group health coverage when they lose that coverage due to a Qualifying Event.

COBRA was enacted in 1986 to protect the interests of individuals losing coverage under their employer’s group health plans.  The COBRA law directs employers to administer their COBRA obligations according to Federal Regulations.  These obligations include sending adequate paperwork, tracking timelines and providing clear, concise and consistent COBRA-related information on behalf of the plan.

What employers are subject to COBRA?

All employers offering health coverage are required to comply with COBRA, unless they are considered a small employer.

An employer is considered a small employer for the current calendar year if there were fewer than 20 employees employed on a typical business day during the previous calendar year. Employees of related companies are grouped together for purposes of this rule, and all employees (full- and part-time) must be counted, not just those covered by the employer’s group health plan.

The rules for calculating employees in a previous year can be complex.  If you have questions on who should be included, contact BASIC for more information.

Which benefits must be offered for COBRA continuation coverage?

All health care coverage provided to similarly-situated active employees must be offered to COBRA Participants. Group health plans can include but are not limited to:

  • Medical (indemnity, PPO, HMO, POS, HDHP, etc.)
  • Dental care
  • Vision care
  • Prescription drugs
  • Health Care Flexible Spending Account & Health Reimbursement Arrangements
  • Employee Assistance Programs that provide coverage

What is a Qualifying Event?

A Qualifying Event includes the loss of  health coverage, and that triggers the start of the COBRA Election Period.  These events are:

  • An employee’s voluntary or involuntary termination of employment
  • An employee’s reduction of hours
  • Divorce or legal separation of the covered employee
  • A dependent child ceasing to be a dependent under plan design
  • Death of an employee
  • Medicare entitlement

Who is a Qualified Beneficiary under COBRA?

Individuals currently covered under your plan under COBRA and any individual who is eligible for COBRA but is still in their 60-day COBRA election period are called Qualified Beneficiaries. This includes all individuals covered at the time of the Qualifying Event, including spouses and dependents of the covered employee. Each Qualified Beneficiary has an independent and separate right to continue coverage under COBRA.

How long may a Qualified Beneficiary continue coverage under COBRA?

18 Months
When the Qualifying Event is termination or reduction of hours

29 months
A Qualified Beneficiary is allowed to extend the coverage to 29 months if they notify the plan of a disability determination by the Social Security Administration (SSA). Qualified beneficiaries are given 60 days to provide the disability notice, measured from the latest of:

  • The date of the SSA’s disability determination;
  • The date of the qualifying event;
  • The date on which the qualified beneficiary would lose coverage under the plan; or
  • The date on which the qualified beneficiary is informed of the obligation to provide the disability notice through the plan’s SPD or initial notice.

36 months
When the Qualifying Event is the employee’s death, divorce, legal separation, Medicare entitlement, or loss of dependency status.

Multiple Qualifying Events

There is also the possibility of extending the maximum COBRA period due to multiple Qualifying Events. A multiple Qualifying Event occurs when an original Qualifying Event, within the original 18 or 29 month period, is followed by a second Qualifying Event that has a 36 month maximum coverage period.  Please note that the 36 month coverage Qualifying Events are only for dependents.

Ex:  Employee A retires on 01/01/2023, timely elects, and pays for COBRA continuation for his wife and himself.  On 06/01/2023 Mr. A passes away.  Mrs. A has now experienced a second Qualifying Event and is eligible to continue coverage under COBRA for an additional 18 months, providing 36 months total continuation coverage.

What is the COBRA timeline?

The COBRA Timeline generally refers to the specific time limits to notify, elect, and pay for COBRA continuation coverage.  Below is an outline of the COBRA Timeline:An employee covered under one or more of the employer’s group health plan experiences a COBRA Qualifying Event.

  • (30 days) The employer must notify their Third Party Administrator (TPA) within 30 days after the qualifying event or last  day of plan coverage, whichever of these events is later.
  • (14 days) The TPA then has 14 days to mail the Qualified Beneficiary’s COBRA election form
  • (60 days) The Qualified Beneficiary has 60 days in which to elect coverage. The 60 days begins from the date the election form was mailed to the Qualified Beneficiary, not on the date it is received.
  • (45 days) Once COBRA has been elected and the proper forms have been sent to the TPA, the Qualified Beneficiary then has 45 days to make their first COBRA premium payment, retroactive to the date coverage was lost.   The 45 day grace period begins with the postmark date of their returned COBRA Election Form.

If The Employer Agrees To Pay The COBRA Participant’s COBRA Premiums For A Period Of Time (Such As In A Severance Agreement), What Is The Process?

If an employer has made arrangements with an employee to cover any amount of their premium payments during their COBRA continuation coverage period, the employer should still follow the standard COBRA procedures.  COBRA continuation coverage is not automatic.  A Qualified Beneficiary must complete their COBRA election form with in the original 60 day election period in order to continue their coverage.

The 18 month COBRA continuation coverage period does not start until the former employer offers COBRA continuation, regardless of who is paying the premiums.

Example: Employee A’s employment terminates on July 1, 2013 and the employer agrees to pay A’s COBRA premiums for the rest of 2013 as part of a severance agreement. If the employer waits until the employer-paid coverage ends and then offers COBRA continuation on January 1, 2014, the employer has just given Employee A access to an additional 6 months of coverage.  It also important to note that not all insurance carriers will honor this type of agreement and the employer can end up self-funding the additional 6 months of coverage.

Managed properly, Employee A should have been notified of his COBRA continuation rights within 30 days of his termination and been required to affirmatively elect COBRA continuation coverage within the COBRA election period. Then the 6 months of employer-paid coverage would count toward the total 18 months of COBRA continuation coverage.

What coverage(s) can a Qualified Beneficiary elect under COBRA?

Qualified Beneficiaries are to be offered the same coverage they had right before they experienced their Qualifying Event. If medical, dental, and vision coverage are offered separately, a Qualified Beneficiary has the right to make separate COBRA elections. If an employer offers “bundled” health care coverage (i.e., one election for medical, dental and vision), the Qualified Beneficiary who is enrolled in the bundled coverage must elect all under COBRA.

Can a COBRA participant make benefit election changes during open enrollment?

Qualified Beneficiaries have the same enrollment rights as active covered employees. That means they can make election changes or enroll additional dependents during your annual open enrollment. The employer is obligated to provide enrollment notification and any enrollment forms or information to these Qualified Beneficiaries.

Can I elect COBRA if I am entitled to Medicare?

Medicare and COBRA continuation coverage acts similarly to Medicare and Group Health Plans where secondary payer rules still apply.  The question you want to ask yourself is, “Is the Qualified Beneficiary entitled to Medicare before or after their COBRA election?”

When any Qualified Beneficiary is entitled to Medicare before their Qualifying Event, they still have the right to elect COBRA continuation coverage and may continue coverage for up to 18 months.  If a Qualified Beneficiary becomes entitled to Medicare after their COBRA election, then their COBRA continuation coverage can be terminated early.

Still have questions?

Please call 800-372-3539 for more information!