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Frequently
Asked Questions
What is the general purpose
of the COBRA law?
What is the purpose of the
initial notification?
We mail our COBRA notifications
first class mail. Is that okay?
How many days does an employee
have to be covered by the health insurance plan in order
to be eligible for COBRA coverage?
An employee terminated employment
and was offered COBRA coverage. His spouse and two children
were also covered by the plan. Can just one of his dependents
elect COBRA coverage, even if he doesn't elect COBRA himself?
A single covered employee quits
and elects COBRA coverage. He then marries while on COBRA.
Can he add his new spouse to the plan?
An employee terminated employment
and we offered he and his wife 18 months of COBRA coverage,
which they elected. Ten months later she had a baby, which
they added to the coverage. He now has health insurance
for himself and his wife under his new employers health
plan. But the new plan is not covering the baby because
of a preexisting condition. Can they leave the baby covered
under COBRA by itself?
Are individuals entitled to
Medicare eligible for COBRA coverage?
What is a COBRA qualifying
event?
If an employee is allowed
to drop covered dependents from the group health insurance
plan during the annual open enrollment period, are we required
to offer COBRA to the dependents who are losing health insurance?
If an employee voluntarily
drops health insurance coverage, am I required to send a
Certificate of Portability?
One of our employees just
took a leave of absence under the FMLA. When does COBRA
come into play?
An ex-employee went on COBRA
January 1, 1996 because of a termination of employment.
He just brought in a Social Security Disability determination
which shows he was disabled according to the Social Security
Administration as of February 1, 1996. Does he qualify for
the extension of coverage to 29 months?
What is the purpose of the
qualifying event notice?
What is the time frame for
sending the qualifying event notice?
Who has to be notified?
Can we hand deliver the qualifying
event notice to an ex-employee in an exit interview?
Is first class mail still
okay for the qualifying event notice?
If we receive a certified
mail back from the post office because the qualified beneficiary
did not pick up the notice, what do I do with it?
What is a Certificate of Health
Insurance Portability?
Is the 60 day COBRA election
period a minimum or maximum period of time?
In counting the election period
do I count Saturdays and Sundays?
If the envelope containing
the election form is postmarked on the last day of the election
period, but we do not receive it until day 68, is that still
a valid election of COBRA?
The election form we use has
a spot where the qualified beneficiary can waive their coverage.
If they sign the waiver, can they change their minds and
elect COBRA?
Can an ex-employee waive COBRA
coverage for his covered spouse?
Once a qualified beneficiary
has elected, how many days does he have to pay for the coverage?
Can a qualified beneficiary
elect COBRA on the 60th day of the election period and then
wait 45 more days to pay? Meaning he was gone for 105 days
before we see any money?
Our company has several group
health insurance plans. We also have an annual open enrollment
period where active employees can change coverage. Are the
open enrollment rights available to qualified beneficiaries
on COBRA?
We are changing our group
health insurance plan from Blue Cross to a region specific
HMO. A qualified beneficiary does not want to go because
his physician is not on the HMO list of approved physicians.
Can he stay on Blue Cross while everyone else moves to the
HMO?
A qualified beneficiary has
reached the end of her 36 months of required COBRA continuation
coverage. She is 64 and three-quarters. Are we required
to keep her covered until she is 65?
In the above situation, could
we provide her more COBRA coverage than what the law requires?
A dependent child has gone
on COBRA by itself due to the employees termination of employment.
What rate would you charge?
What is the grace period on
monthly COBRA premiums?
What is a timely premium
payment for a month of COBRA coverage?
Are we required to send monthly
COBRA billings, warning letters, or lapse notices?
We had an employee terminate
employment at age 64. We offered he and his wife 18 months
of COBRA continuation coverage. Twelve months later, at
age 65, he became entitled to Medicare. What happens to
the COBRA continuation coverage?
If I'm going to cancel COBRA
coverage on a qualified beneficiary for non-payment of premium,
am I required to notify them?
An employee left our company
and took COBRA coverage. He is now covered by another employer’s
group health plan. Can he maintain the COBRA coverage as
well?
Does every group health plan
have an individual conversion policy?
If our plan does not have
a conversion policy, are we required to notify the qualified
beneficiary that COBRA coverage is ending?
What
is the general purpose of the COBRA law?
Under normal circumstances, only active full-time employees
can participate on employers group health insurance plans.
Prior to COBRA, when an employee left the company, they
and any covered family members lost their health insurance
as well, since the employee no longer fit the definition
of a full-time employee. If the employee or a family member
was ill, they would be unable to obtain insurance in the
open market since they are already sick. Congress, in passing
the COBRA law, remedied this situation by mandating employers
simply stand at the back door of the business and offer
the ex-employee and/or the covered dependents the opportunity
to buy the employers health insurance back from the employer,
even though the employee doesn't work there anymore. In
this way, the sick employee or dependent stays insured in
the private sector (your health plan) and off Medicaid,
or other welfare benefit program.
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What is the purpose
of the initial notification?
It serves two purposes. First it highlights the potential
COBRA benefits that may be available to the covered employee
and/or covered dependents in the future. And, secondly,
it details the covered employee and/or covered dependents
notification obligations to the plan administrator regarding
divorces and dependent children ceasing to be dependents
under the terms of the plan.
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We
mail our COBRA notifications first class mail. Is that okay?
Yes. The plan administrator is obligated to prove they mailed
the COBRA notice, not that the notice has been received.
Both the U.S. Department of Labor and U.S. Federal Courts
have ruled first class mail sufficient for COBRA purposes.
A first class mailing is deemed received unless returned
to the sender.
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How
many days does an employee have to be covered by the health
insurance plan in order to be eligible for COBRA coverage?
One! If the employee is covered by the health plan on January
1, 1997 and quits on January 2, 1997, the ex-employee is
entitled to COBRA benefits. It is for this reason alone
all employers should have a waiting period of at least 30
days before health insurance benefits begin. This helps
eliminate COBRA administration on employees who only work
for the employer a week or two.
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An
employee terminated employment and was offered COBRA coverage.
His spouse and two children were also covered by the plan.
Can just one of his dependents elect COBRA coverage, even
if he doesn't elect COBRA himself?
Yes. In this situation, there are four qualified beneficiary’s,
the ex-employee, spouse, and the two kids. Each qualified
beneficiary has independent election rights to COBRA.
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A
single covered employee quits and elects COBRA coverage.
He then marries while on COBRA. Can he add his new spouse
to the plan?
If the health plan rules allow an active employee to add
a new spouse (within 30-31 days, etc.), then the qualified
beneficiary also has this right. However, the new covered
spouse does not gain the rights of a “qualified beneficiary”
and can only stay covered for as long as the qualified beneficiary
is covered.
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An
employee terminated employment and we offered he and his
wife 18 months of COBRA coverage, which they elected. Ten
months later she had a baby, which they added to the coverage.
He now has health insurance for himself and his wife under
his new employers health plan. But the new plan is not covering
the baby because of a preexisting condition. Can they leave
the baby covered under COBRA by itself?
YES! Under new COBRA rules established by the Health Insurance
Portability and Accountability Act of 1996, effective January
1, 1997, new babies or adopted children added to the family
after the date of the original COBRA qualifying event can
be added to the plan and they gain the rights of a “qualified
beneficiary.” This means they have the right to stay
covered under COBRA even if no other qualified beneficiaries
remain. They obtain this COBRA right even though they were
not covered by the plan on the day before the qualifying
event as outlined above. While effective on January 1, 1997,
this new COBRA provision is retroactive to include events
that occurred prior to that date. That is why employers
are required to notify qualified beneficiaries by November
1, 1996 of this change.
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Are
individuals entitled to Medicare eligible for COBRA coverage?
If an individual is on COBRA coverage and becomes entitled
to Medicare after the date of COBRA election, then COBRA
coverage can clearly be terminated. However, the question
arises as to the individual who is entitled to Medicare
before the date of the qualifying event. According to the
IRS COBRA Proposed Regulations issued in 1987, an individual
entitled to Medicare benefits does not fit the definition
of a qualified beneficiary and is therefore not entitled
to COBRA coverage. In the only court case on this issue,
however, the Supreme Court for the State of South Dakota
ruled an individual was still entitled to COBRA even though
they were on Medicare. This clearly goes against the IRS
COBRA Proposed Regulations. While this court ruling is a
state ruling and therefore not binding on parties outside
of South Dakota, your legal counsel needs to give you a
ruling on how strong this case may impact your COBRA administration.
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What
is a COBRA qualifying event?
A COBRA qualifying event occurs when an event listed in
the COBRA statute occurs, and the event causes an employee,
spouse, or covered dependent to lose health insurance under
the employers group health plan. To lose health insurance
means the individual ceases to be covered under the same
terms and conditions they were covered under before the
event happened.
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If
an employee is allowed to drop covered dependents from the
group health insurance plan during the annual open enrollment
period, are we required to offer COBRA to the dependents
who are losing health insurance?
In general, no. A simple voluntary termination of health
insurance made by the employee during an open enrollment
period is not a COBRA qualifying event. The loss of coverage
is not resulting from an event listed in the COBRA statute.
There has been no termination of employment, reduction of
hours, death, Medicare entitlement, divorce/legal separation,
or a dependent child ceasing to be a dependent child under
the terms of the group health plan. The employee is simply
choosing not to cover dependents under the plan.
If, however, the employee notifies the plan
administrator they are removing the dependents because of
a divorce/legal separation or a dependent ceasing to be
a dependent, then the employer is obligated to offer COBRA
benefits to the dependents.
Important Note: After
June 1, 1997 employers are required to provide a Certificate
of Health Insurance Portability to all individuals who lose
insurance under the group plan at any time.
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If
an employee voluntarily drops health insurance coverage,
am I required to send a Certificate of Portability?
Yes. Under the Health Insurance Portability and Accountability
Act of 1996, any loss of insurance results in a Certificate
of Portability being provided to the individuals losing
coverage.
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One
of our employees just took a leave of absence under the
FMLA. When does COBRA come into play?
If the employee fails to return to work after the FMLA period
expires, COBRA should be offered at that time. The 18 months
of coverage also begins at that time. There is no back dating
of the COBRA coverage period. See the COBRA FMLA section
for more information.
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An
ex-employee went on COBRA January 1, 1996 because of a termination
of employment. He just brought in a Social Security Disability
determination which shows he was disabled according to the
Social Security Administration as of February 1, 1996. Does
he qualify for the extension of coverage to 29 months?
Yes. Under new COBRA rules established by the Health Insurance
Portability and Accountability Act of 1996, effective January
1, 1997, if a qualified beneficiary is deemed disabled by
the Social Security Administration within the first 60 days
of continuation coverage, then the qualified beneficiary
qualifies for the extended 11 months of COBRA coverage.
In addition, the COBRA change is retroactive to include
any individual that is currently on COBRA on January 1,
1996. So the change would apply to the above individual
even though the COBRA event took place on January 1, 1996.
These rules differ from old COBRA rules
which stated the individual had to be deemed disabled as
of the date of the qualifying event. All written COBRA materials
(SPDs, handbooks, etc.) need to be examine to insure the
terms of this COBRA extension are clearly spelled out.
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What
is the purpose of the qualifying event notice?
Unlike the initial notice which highlights covered participants
potential COBRA rights, the qualifying event notice is a
notice of their actual rights under COBRA. It is a “contract”
offer between the employer and the qualified beneficiary.
It details the terms and conditions of the contract, such
as premium rates, due dates, coverage periods, etc.
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What
is the time frame for sending the qualifying event notice?
The hands-on plan administrator has in general 14 calendar
days to provide the notice from the date they learn the
event has occurred.
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Who
has to be notified?
All qualified beneficiary’s have to be notified of
their COBRA rights. If all qualified beneficiary's live
at one address, then one notification can be sent as long
as it is addressed to the entire family. If a qualified
beneficiary does not live at the home address (for example
a dependent child from a previous marriage that is living
with the ex-spouse in another location), then a separate
notice would need to be sent. This is assuming you have
the information on this other dependent in the employee’s
file.
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Can
we hand deliver the qualifying event notice to an ex-employee
in an exit interview?
Yes. Have the employee sign an acknowledgment of receipt
and place the receipt and copy of the notification in the
employee’s file. However, keep in mind hand delivery
to the employee is not notification to any other qualified
beneficiary's. You would need to mail a qualifying event
notice to the other qualified beneficiary's to have proper
administration.
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Is
first class mail still okay for the qualifying event notice?
Yes. The federal courts have consistently held that first
class mail is sufficient for COBRA purposes. Again, first
class mail is deemed received unless it is returned to the
sender. You prove you mailed it through your testimony and
documentation procedures.
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If
we receive a certified mail back from the post office because
the qualified beneficiary did not pick up the notice, what
do I do with it?
Since prior to sending the notice you verified the address
was the last known address in the file, your notification
procedures are complete. Place the returned notice in your
file. Some employers will send a first class mailing at
this time, but that is not required.
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What
is a Certificate of Health Insurance Portability?
Under provisions of the Health Insurance Portability and
Accountability Act of 1996, after June 1, 1997 employers
are required to provide all individuals who lose group health
insurance a certificate of portability. This certificate
details the amount of time the individual was covered on
the plan (including waiting periods) and in some cases the
type of coverage.
Individuals can present this certificate
to a new employer, who would credit the time covered under
your health plan towards the new employer’s pre-existing
condition limitation time period. For example, if the individual
had ten months of coverage under your plan and the new employer
had a 12 month pre-existing condition limitation, the new
employer would subtract 10 months from the 12 and the individual
would only have a two month pre-existing condition limitation.
For coverage under your plan to count, there must not be
a gap in coverage for more than 63 days from the time your
coverage ends to the first day of the new employer’s
waiting period.
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Is
the 60 day COBRA election period a minimum or maximum period
of time?
The COBRA statute established a “minimum” COBRA
election period of 60 days. It is up to the employer to
establish the maximum time frame. All employers want the
minimum 60 day election period to also be the maximum 60
day election period, so make sure your COBRA language clearly
states the election period is a maximum 60 day period of
time. It is highly recommended your COBRA “contract”
qualifying event notice include the actual last date to
elect.
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In
counting the election period do I count Saturdays and Sundays?
Yes. However, if the last day of the election period ends
on a Saturday, Sunday, or a holiday, you are required to
extend the election period until the end of the next business
day.
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If
the envelope containing the election form is postmarked
on the last day of the election period, but we do not receive
it until day 68, is that still a valid election of COBRA?
Yes. As long as the election form is postmarked within the
election period, the election is valid.
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The
election form we use has a spot where the qualified beneficiary
can waive their coverage. If they sign the waiver, can they
change their minds and elect COBRA?
Yes. A qualified beneficiary can change their minds and
revoke the waiver at any time during the election period.
Important note: If your election form contains a waiver
(it’s not required), make sure the form clearly states
the qualified beneficiary canrevoke the waiver during the
election period. Otherwise, there is a lawsuit waiting to
happen.
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Can
an ex-employee waive COBRA coverage for his covered spouse?
No. The qualified beneficiary spouse has independent election
rights.
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Once
a qualified beneficiary has elected, how many days does
he have to pay for the coverage?
45 days measured from the date of election.
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Can
a qualified beneficiary elect COBRA on the 60th day of the
election period and then wait 45 more days to pay? Meaning
he was gone for 105 days before we see any money?
Yes.
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Our
company has several group health insurance plans. We also
have an annual open enrollment period where active employees
can change coverage. Are the open enrollment rights available
to qualified beneficiaries on COBRA?
Yes. Remember, there is no such thing as a COBRA group health
plan. If a qualified beneficiary is on “COBRA,”
they are simply buying the health insurance plan from you
that all the active employees are covered by. Therefore,
they do have open enrollment rights.
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We
are changing our group health insurance plan from Blue Cross
to a region specific HMO. A qualified beneficiary does not
want to go because his physician is not on the HMO list
of approved physicians. Can he stay on Blue Cross while
everyone else moves to the HMO?
No. First of all, if you change the plan for the active
employees you have the right to change the plan for qualified
beneficiaries. And secondly, Blue Cross will not maintain
a group health insurance plan for one qualified beneficiary.
Once the employer cancels the insurance contract, Blue Cross
is no longer obligated to provide insurance to anyone from
the group, including qualified beneficiaries.
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A
qualified beneficiary has reached the end of her 36 months
of required COBRA continuation coverage. She is 64 and three-quarters.
Are we required to keep her covered until she is 65?
No, according to federal COBRA statute. While she will have
a potential gap in coverage, you have provided her the required
length of coverage under COBRA and are not obligated to
go beyond that period. Please note, however, some state
laws (California, Georgia, etc.) require this potential
gap be covered under the individual state continuation rules.
Please check with your state Department of Insurance for
any state law that may impact this situation.
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In
the above situation, could we provide her more COBRA coverage
than what the law requires?
The COBRA statute creates minimum required continuation
coverage periods. So if the employer wishes to go beyond
those minimum requirements, they are free to do so. However,
before the company makes that decision, two factors need
to be considered. First, if they choose to provide extended
coverage to one qualified beneficiary, then they better
be prepared to offer extended COBRA to all qualified beneficiaries
in similar circumstances. And, secondly, while the employer
may wish to extend coverage, the insurance carrier, or if
the health insurance is partially self-funded, the reinsurance
carrier, is not obligated to provide COBRA coverage beyond
what is required by law. So, prior to any decision being
made in this regard, written approval should be obtained
from the carrier.
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A
dependent child has gone on COBRA by itself due to the employees
termination of employment. What rate would you charge?
A single employee rate.
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What
is the grace period on monthly COBRA premiums?
In general, a qualified beneficiary has a 30 day grace period
to pay premiums, measured from the first day of the monthly
benefit period. If, however, the employer or plan has a
grace period longer than 30 days, then the qualified beneficiary
is provided the longer grace period.
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What
is a timely premium payment for a month of COBRA coverage?
If the premium is not paid by the monthly due date, the
qualified beneficiary has in general a period of 30 days
grace in which to make the premium payment. If the qualified
beneficiary hand delivers the premium, it must be in your
hands prior to the end of the grace period. If the premium
is mailed, the envelope must be postmarked by the end of
the grace period. You might not receive it within the 30
days, but if it is postmarked within the 30 days, it is
still considered a valid and timely premium payment.
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Are
we required to send monthly COBRA billings, warning letters,
or lapse notices?
No. While some employers do utilize monthly billings or
coupon books, there is no requirement under the statute
which requires this action. These are courtesy notices.
See the sample premium letters for possible use.
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We
had an employee terminate employment at age 64. We offered
he and his wife 18 months of COBRA continuation coverage.
Twelve months later, at age 65, he became entitled to Medicare.
What happens to the COBRA continuation coverage?
Upon his entitlement to Medicare, the employer can cancel
his COBRA continuation coverage. At the same time, however,
the Medicare entitlement is a second COBRA event for the
spouse, which then allows her 36 months of COBRA continuation
coverage measured from the date of the original COBRA event
(termination of employment). This is assuming she is not
also entitled to Medicare.
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If
I'm going to cancel COBRA coverage on a qualified beneficiary
for non-payment of premium, am I required to notify them?
YES! After June 1, 1997 the answer is yes. In addition to
a termination of COBRA notice, an updated Certificate of
Health Insurance Portability would also have to be provided.
Sample notices are contained in the guide for this purpose.
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An
employee left our company and took COBRA coverage. He is
now covered by another employer’s group health plan.
Can he maintain the COBRA coverage as well?
If the qualified beneficiary has a health condition which
is subjected to a pre-existing condition clause under the
new employer’s plan, the qualified beneficiary can
maintain the COBRA coverage so the pre-existing condition
will be covered. This is an extremely difficult COBRA termination
event since the only contact an employer has with an ex-employee
is the COBRA money that arrives on a monthly basis. Before
an employer cancels COBRA coverage because the qualified
beneficiary has other group coverage, three items need to
be documented. These are; 1) proof the qualified beneficiary
is actually covered by the other plan, 2) the other plan
does or does not have a pre-existing condition clause in
the plan, which means you have to have a copy of the other
employer’s health plan, and 3) you have to make a determination
the qualified beneficiary does not have a pre-existing condition,
which means you have to make a medical determination on
the health of the qualified beneficiary. All difficult items
to document.
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Does
every group health plan have an individual conversion policy?
No. While most insured plans, HMOs, PPOs, etc. have individual
conversions, most partially self-funded plans do not. Check
your health insurance contract to determine if the individual
policy is available.
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If
our plan does not have a conversion policy, are we required
to notify the qualified beneficiary that COBRA coverage
is ending?
After June 1, 1997 provisions of the Health Insurance Portability
and Accountability Act of 1996 require employers to notify
all qualified beneficiaries when their COBRA coverage ceases.
In addition, an updated Certificate of Health Insurance
Portability is also required to be sent when the COBRA coverage
ends. Samples have been provided for your review.
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