Published on April 21st, 2011 by Alan L Sklover
“Health nuts are going to feel stupid someday,
lying in hospitals dying of nothing.”
- Redd Foxx
ACTUAL CASE HISTORIES*: We are frequently asked questions about COBRA, the federal workplace law that is probably utilized by more employees than any other. It’s a great law, very practical in its effect, and immediate in its advantages.
To assist people in this regard, we’ve put together a list of the 21 Most Frequently Asked Questions about COBRA, along with their answers. They are presented below.
LESSON TO LEARN: If you are in danger of losing your employer-provided health care coverage, you are likely able to take advantage of the federal COBRA law, which provides a mechanism to obtain health care coverage continuation. But, before you can exercise your legal rights, you need to know your legal rights. Here’s a summary of the COBRA basics you ought to know.
WHAT YOU CAN DO: Take a few minutes to review these 21 Most Frequently Asked Questions about COBRA-mandated health care continuation coverage. Some of your rights may surprise you:
Question 1: What is COBRA continuation health coverage?
In 1986, the U.S. Congress passed landmark legislation titled Consolidated Omnibus Budget Reconciliation Act (COBRA). That law provides a way for employees to receive continuation of group health coverage that otherwise might be terminated.
Question 2: What does COBRA do?
COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. The coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees, while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, then individual health coverage.
Question 3: Who is entitled to benefits under COBRA?
There are three necessary elements to qualifying for COBRA benefits: (1) qualifying Plans; (2) qualifying Beneficiaries; and (3) qualifying Events.
(1) Qualified Plans: Group health plans for employers with 20 or more employees on more than 50% of typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted. Each part-time employee counts as a fraction of an employee, pro-rated by the number of hours worked by full-time employees of that employer.
[Note: Some states, like New York, have state laws that say, in effect, “If your employer is smaller than 20 employees, you have the same rights under state law that you would have had under the federal COBRA law.” For those employed by smaller companies, don’t forget to check your state laws on this point.]
(2) Qualified Beneficiaries: A qualified beneficiary generally is an individual covered by a group health plan on the day before a “qualifying event” who is either the employee, the employee’s spouse, or an employee’s dependent child. In certain cases a retired employee, the retired employee’s spouse, and the retired employee’s dependent children may be qualifying beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Agents, independent contractors and directors who participate in the group health plan may also be qualified beneficiaries.
(3) Qualifying Events: Qualifying events are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are, and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.
Qualifying Events for Employees:
a. Voluntary or involuntary termination of employment other than for gross misconduct
b. Reduction in the number of hours employed
Qualifying Events for Spouses:
a. Voluntary or involuntary termination of the covered employee’s employment for any reason other than for gross misconduct
b. Reduction in hours worked by the covered employee
c. Covered employee’s becoming entitled to Medicare
d. Divorce or legal separation of the covered employee
e. Death of the covered employee
Qualifying Events for Dependent Children:
a. Loss of dependent child status under plan rules
b. Voluntary or involuntary termination of covered employee’s employment for any reason other then gross misconduct
c. Reduction in the number of hours worked by the covered employee
d. Covered employee becoming entitled to Medicare
e. Divorce or legal separation of the covered employee
f. Death of the covered employee
Question 4: How does a person become eligible for COBRA continuation coverage?
To become eligible for COBRA continuation coverage, you must have been enrolled in your employer’s health plan when you worked and the health plan must continue to be in effect for active employees. COBRA continuation coverage is available upon the occurrence of a qualifying event that would, except for the COBRA continuation coverage, cause an individual to lose his or her health care coverage.
Question 5: What group health plans are subject to COBRA?
The law generally covers health plans maintained by private-sector employers with 20 or more employees, employee organizations, state or local governments.
Question 6: What process must individuals follow to elect COBRA continuation coverage?
Employers must notify plan administrators of a qualifying event within 30 days after an employee’s death, termination, reduced hours of employment or entitlement to Medicare.
A qualified beneficiary must notify the plan administrator of a qualifying event within 60 days after divorce or legal separation or a child’s ceasing to be covered as a dependent under plan rules.
Plan participants and beneficiaries generally must be sent an election notice no later than 14 days after the plan administrator receives notice that a qualifying event has occurred. The individual then has 60 days to decide whether to elect COBRA continuation coverage. The person has 45 days after electing coverage to pay the initial premium.
Question 7: How long after a qualifying event do I have to elect COBRA coverage?
Qualified beneficiaries must be given an election period during which each qualified beneficiary may choose whether to elect COBRA coverage. Each qualified beneficiary may independently elect COBRA coverage. A covered employee or the covered employee’s spouse may elect COBRA coverage on behalf of all other qualified beneficiaries. A parent or legal custodian may elect on behalf of a minor child.
Qualified beneficiaries must be given at least 60 days to make the election. The period is measured from the later of the coverage loss date or the date the COBRA election notice is provided by the employer or plan administrator. The election notice must be provided in person or by first class mail within 14 days after the plan administrator receives notice that a qualifying event has occurred.
Question 8: How do I file a COBRA claim for benefits?
Health plan rules explain how to obtain benefits and must include written procedures for processing claims. Claims procedures must be described in the Summary Plan Description (sometimes called an “SPD.”) You should submit a claim for benefits in accordance with the plan’s rules for filing claims.
If the claim is denied you must be given notice of the denial in writing generally within 90 days after the claim is filed. The notice should state the reasons for the denial, any additional information needed to support the claim, and procedures for appealing the denial. You will have at least 60 days to appeal the denial and you must receive a decision on the appeal generally within 60 days after that.
To obtain COBRA health coverage, you must complete, sign and send to your employer a COBRA Election Notice. We offer a form for your use to do just that. To obtain a copy, just [click here.]
Question 9: Can individuals qualify for longer periods of COBRA continuation coverage?
Yes. Disability can extend the 18 month period of continuation coverage for a qualifying event that is a termination of employment or reduction in hours. To qualify for additional months of COBRA continuation coverage, the qualified beneficiary must:
a. Have a ruling from the Social Security Administration that he or she became disabled within the first 60 days of COBRA continuation coverage; and
b. Send the plan administrator a copy of the Social Security ruling letter within 60 days of receipt, but prior to the expiration of the 18-month period of coverage.
Question 10: Is a divorced spouse entitled to COBRA continuation coverage from their former spouse’s group health plan?
Under COBRA, participants, covered spouses and dependent children may continue their plan coverage for a limited period of time when they would otherwise lose coverage due to a particular event, such as divorce or legal separation. A covered employee’s spouse who would lose coverage due to a divorce may elect continuation coverage under the plan for a maximum of 36 months.
A qualified beneficiary must notify the plan administrator of a qualifying event within 60 days after divorce or legal separation. After being notified of a divorce, the plan administrator must give notice, generally within 14 days, to the qualified beneficiary of the right to elect COBRA continuation coverage.
Question 11: If I waive COBRA coverage during the election period, can I still get coverage at a later date?
If a qualified beneficiary waives COBRA coverage during the election period, he or she may revoke the waiver of coverage before the end of the election period. A beneficiary may then elect COBRA coverage. Then, the plan need only provide continuation coverage beginning on the date the waiver is revoked.
Question 12: Under COBRA, what benefits must be covered?
Qualified beneficiaries must be offered coverage identical to that available to similarly situated beneficiaries who are not receiving COBRA coverage under the plan (generally, the same coverage that the qualified beneficiary had immediately before qualifying for continuation coverage.) A change in benefits under the plan for active employees will also apply to qualified beneficiaries. Qualified beneficiaries must be allowed to make the same choices given to non-COBRA beneficiaries under the plan, such as during periods of open enrollment under the plan.
Question 13: When does COBRA coverage begin?
COBRA coverage begins on the date that health care coverage would otherwise have been lost by reason of a qualifying event.
Question 14: How long does COBRA coverage last?
COBRA establishes required periods of coverage for continuation of health benefits. A plan, however, may provide longer periods of coverage beyond those required by COBRA. COBRA beneficiaries generally are eligible for group coverage during a maximum of 18 months for qualifying events due to employment termination or reduction of hours of work. Certain qualifying events, or a second qualifying event during the initial period of coverage, may permit a beneficiary to receive a maximum of 36 months of coverage.
Coverage begins on the date that coverage would otherwise have been lost by reason of a qualifying event and will end at the end of the maximum period. It may end earlier if:
a. Premiums are not paid on a timely basis
b. The employer ceases to maintain any group health plan
c. After the COBRA election, coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary. However, if other group health coverage is obtained prior to the COBRA election, COBRA coverage may not be discontinued even if the other coverage continues after the COBRA election.
d. After the COBRA election, a beneficiary becomes entitled to Medicare benefits. However, if Medicare is obtained prior to COBRA election, COBRA coverage may not be discontinued, even if the other coverage continues after the COBRA election.
Although COBRA specifies certain periods of time that continued health coverage must be offered to qualified beneficiaries, COBRA does not prohibit plans from offering continuation health coverage that goes beyond the COBRA periods.
Question 15: Who pays for COBRA coverage?
Beneficiaries may be required to pay for COBRA coverage. The premium cannot exceed 102% of the cost to the plan for similarly situated individuals who have not incurred a qualifying event, including both the portion paid by employees and any portion paid by the employer before the qualifying event, plus 2% for administrative costs.
For qualified beneficiaries receiving the 18 month disability extension of coverage, the premium for those additional months may be increased to 150% of the plan’s total cost of coverage.
COBRA premiums may be increased if the costs to the plan increase but generally must be fixed in advance of a 12-month premium cycle. The plan must allow you to pay premiums on a monthly basis if you ask to do so, and the plan may allow you to make premium payments at other intervals (weekly or quarterly) if acceptable to the plan.
The initial premium payment must be made within 45 days after the date of the COBRA election by the qualified beneficiary. Payment generally must cover the period of coverage from the date of COBRA election retroactive to the date of the loss of coverage due to the qualifying event. Premiums for successive periods of coverage are due on the date stated in the plan with a minimum of 30-day grace period for payments. Payment is considered made on the date sent to the plan.
If premiums are not paid by the first day of the period of coverage the plan administrator has the option to cancel coverage until payment is received and then reinstate coverage retroactively to the beginning of the coverage period.
If the amount of the payment made to the plan is made in error but is not significantly less than the amount due, the plan is required to notify you of the deficiency and grant a reasonable period (for this purpose, 30 days is considered reasonable) to pay the difference. The plan is not obligated to send monthly premium notices.
COBRA beneficiaries remain subject to the rules of the plan and therefore must satisfy all costs related to co-payments and deductibles, and are subject to catastrophic and all benefit limits.
Question 16: If I elect COBRA, how much do I pay?
When you were an active employee, your employer may have paid all or a part of your group health premiums. Under COBRA, as a former employee no longer receiving benefits, you will usually pay the entire premium amount, that is, the portion of the premium that you paid as an active employee and the amount of the contribution made by your employer. In addition, there may be a 2% administrative fee.
While COBRA rates may seem high, you will be paying group premium rates, which are generally lower than individual rates.
Since it is likely there will be a lapse of a month or more between the date of layoff and the time you make the COBRA election decision, you may have to pay health premiums retroactively from the time of separation from the company. The first premium, for instance, will cover the entire time since your last day of employment with your former employer.
You should also be aware that it is your responsibility to pay for COBRA coverage even if you do not receive a monthly statement.
Although they are not required to do so, some employers may subsidize COBRA coverage.
Question 17: Does the 2009 COBRA Premium Subsidy remain available?
No. That temporary program has expired.
Question 18: Can I receive COBRA benefits while on FMLA leave?
No. The Family and Medical Leave Act (often called “FMLA”) requires an employer to maintain coverage under any group health plan for an employee on FMLA leave under the same conditions coverage would have been provided if the employee had continued working.
Coverage provided under the FMLA is not COBRA coverage, and FMLA leave is not a qualifying event under COBRA. A COBRA qualifying event may occur, however, when an employer’s obligation to maintain health benefits under FMLA ceases, such as when an employee notifies an employer of his or her intent not to return to work.
Question 19: What is the Federal Government’s role in COBRA?
COBRA continuation coverage is administered by several agencies. The federal Departments of Labor and Treasury have jurisdiction over private-sector health group plans. The U.S. Department of Health and Human Services administers the continuation coverage law as it affects public-sector health plans.
The Department of Labor’s interpretative and regulatory responsibility is limited to the disclosure and notification requirements of COBRA.
The Internal Revenue Service, Department of the Treasury, has issued regulations on COBRA provisions related to eligibility, coverage and premiums. Both the Departments of Labor and Treasury share jurisdiction for enforcement of these provisions.
Question 20: I am a federal employee. Can I receive benefits under COBRA?
No. Federal employees are not covered by COBRA, but a similar law. Those employees should contact the personnel office serving their agency for information on temporary continuation of federal health benefits.
Question 21: Am I eligible for COBRA if my company closed or went bankrupt and there is no health plan?
No. If there is no longer a health plan, there is no coverage available.
Important Note: Nothing expressed above should be considered legal advice; it is not. Only an attorney licensed to practice law in your locale, who you have retained, can give you legal advice. You should not rely on the above without first confirming its continued accuracy with a licensed attorney, as the law changes every day.
Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” Knowing your legal rights is perhaps the first step you can take on that path. That’s what SkloverWorkingWisdom™ is all about.
*A Note About Our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.
Please Note: This Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.
© 2011, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited. [Attorney Advertisement]
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