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Frequently
Asked Questions
about
COBRA
Continuation Health Coverage
What is COBRA continuation health
coverage?
Congress
passed the landmark Consolidated Omnibus Budget
Reconciliation Act health benefit provisions
in 1986. The law amends the Employee Retirement
Income Security Act, the Internal Revenue
Code and the Public Health Service Act to
provide continuation of group health coverage
that otherwise might be terminated.
What does COBRA
do?
COBRA
contains provisions giving certain former
employees, retirees, spouses former spouses,
and dependent children the right to temporary
continuation of health coverage at group rates.
This 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, than individual health
coverage.
Which employers
are required to offer COBRA coverage?
Employers
with 20 or more employees are usually required
to offer COBRA coverage and to notify their
employees of the availability of such coverage.
COBRA applies to plans maintained by private-sector
employers and sponsored by most state and
local governments.
Who is entitled
to benefits under COBRA?
There
are 3 elements to qualifying for COBRA benefits.
COBRA establishes specific criteria for plans,
qualified beneficiaries, and qualifying events:
Plan
Coverage - Group health plans for
employers with 20 or more employees on more
than 50 percent of its typical business days
in the previous calendar year are subject
to COBRA. Both full and part-time employees
are counted to determine whether a plan is
subject to COBRA. Each part-time employee
counts as a fraction on an employee, with
the fraction equal to the number of hours
that the part-time employee worked divided
by the hours an employee must work to be considered
full-time.
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 an 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 qualified
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.
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.
The
qualifying events for employees are:
- Voluntary
or involuntary termination of employment
for reasons other than gross misconduct
- Reduction
in the number of hours of employment
The
qualifying events for spouses are:
- Voluntary
or involuntary termination of the covered
employee's employment for any reason other
than gross misconduct
- Reduction
in the hours worked by the covered employee
- Covered
employee's becoming entitled to Medicare
- Divorce
or legal separation of the covered employee
- Death
of the covered employee
The
qualifying events for dependent children are
the same as for the spouse with one addition:
- Loss
of dependent child status under the plan
rules
- Voluntary
or involuntary termination of the covered
employee's employment for any reason other
than gross misconduct
- Reduction
in the hours worked by the covered employee
- Covered
employee's becoming entitled to Medicare
- Divorce
or legal separation of the covered employee
- Death
of the covered employee
How
does a person become eligible for COBRA continuation
coverage?
To
be eligible for COBRA 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.
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, or state
or local governments.
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 not 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.
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 guardian may elect on behalf
of a minor child. Qualified beneficiaries must
be given at least 60 days for the election.
This 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.
How do I file a COBRA claim for benefits?
Health
plan rules must explain how to obtain benefits
and must include written procedures for processing
claims. Claims procedures must be described
in the Summary Plan Description.
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 a denial
and you must receive a decision on the appeal
generally within 60 days after that.
Contact
the plan administrator for more information
on filing a claim for benefits. Complete plan
rules are available from employers or benefits
offices. There can be charges up to 25 cents
a page for copies of plan rules.
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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 of hours. To qualify for additional months of
COBRA continuation coverage, the qualified beneficiary must:
- Have
a ruling from the Social Security Administration that
he or she became disabled within the first 60 days of
COBRA continuation coverage
- Send
the plan a copy of the Social Security ruling letter within
60 days of receipt, but prior to expiration of the 18-month
period of coverage
If these requirements are met, the entire family qualifies
for an additional 11 months of COBRA continuation coverage.
Plans can charge 150% of the premium cost for the extended
period of coverage.
Is a divorced spouse entitled
to COBRA coverage from their former spouses’ group health
plan?
Under
COBRA, participants, covered spouses and dependent children
may continue their plan coverage for a limited 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.
Divorced
spouses may call their plan administrator or the EBSA Toll-Free
Employee & Employer Hotline number, 1.866.444.EBSA (3272)
if they have questions about COBRA continuation coverage or
their rights under ERISA.
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.
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 the benefits under
the plan for the 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 by the
plan.
Who pays for COBRA coverage?
Beneficiaries
may be required to pay for COBRA coverage. The premium cannot
exceed 102 percent 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 percent for
administrative costs.
For
qualified beneficiaries receiving the 11 month disability
extension of coverage, the premium for those additional months
may be increased to 150 percent 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 each 12-month premium
cycle. The plan must allow qualified beneficiaries to pay
premiums on a monthly basis if they ask to do so, and the
plan may allow them to make payments at other intervals (weekly
or quarterly).
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 30-day grace period for payments. Payment is
considered to be made on the date it is sent to the plan.
If
premiums are not paid by the first day of the period of coverage,
the plan has the option to cancel coverage until payment is
received and then reinstate coverage retroactively to the
beginning of the period of coverage.
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 the qualified beneficiary 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 other benefit
limits.
What is the Federal Government's
role in COBRA?
COBRA
continuation coverage laws are administered by several agencies.
The Departments of Labor and Treasury have jurisdiction over
private-sector health group health plans. The Department of
Health and Human Services administers the continuation coverage
law as it affects public-sector health plans.
The
Labor Department's interpretive and regulatory responsibility
is limited to the disclosure and notification requirements
of COBRA. If you need further information about ERISA generally,
write to the EBSA office nearest where you live. Consult the
U.S. Government, U.S. Department of Labor listing in your
telephone directory for the office nearest you or call EBSA's
Toll-Free Employee & Employer Hotline number at: 1.866.444.EBSA
(3272) and request a list of EBSA offices, or write to:
- U.S.
Department of Labor
Employee Benefits Security Administration
Division of Technical Assistance and Inquiries
200 Constitution Avenue NW, Suite N-5619
Washington, DC 20210
The
Internal Revenue Service, Department of the Treasury, has
issued regulations on COBRA provisions relating to eligibility,
coverage and premiums in 26 CFR Part 54, Continuation Coverage
Requirements Applicable to Group Health Plans. Both the Departments
of Labor and Treasury share jurisdiction for enforcement of
these provisions.
The
Center for Medicare and Medicaid Services offers information
about COBRA provisions for public-sector employees. You can
write them at this address:
- Center
for Medicare and Medicaid Services
7500 Security Boulevard
Mail Stop S3-16-26
Baltimore, MD 21244-1850
Tel 410.786.3000
Who
can answer other COBRA questions?
COBRA
administration is shared by three federal agencies. The U.S.
Department of Labor handles questions about notification rights
under COBRA for private-sector employees. The Department of
Health and Human Services handles questions relating to state
and local government workers. The Internal Revenue Service,
Department of the Treasury, has other COBRA jurisdiction.
More
details about COBRA coverage are included in the booklet Health
Benefits under the Consolidated Omnibus Budget Reconciliation
Act. To request a copy, call EBSA's Toll-Free Employee
& Employer Hotline number at: 1.866.444.EBSA (3272).
www.dol.gov
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