COBRA Basics

Federal COBRA Administration

What group health plans are subject to COBRA?
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 of 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.

Employers with less than 20 employees are not subject to COBRA at the federal level.

Under COBRA, what benefits must be covered?
COBRA applies for medical, dental, and vision plans. 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 for the plan.

How do employees find out about COBRA coverage and how to elect it?

1. General Notices - Employers or health plan administrators must provide an initial general notice if an individual is entitled to COBRA benefits. It is good practice to provide employees with the initial notice about COBRA coverage at the time of hire.
2. Qualifying Event - When the individual is no longer eligible for health coverage (due to a qualifying event), the employer must also provide the individual with a specific notice regarding their rights to COBRA continuation benefits.

Employers must notify their plan administrators within 30 days after an employee’s termination or after a reduction in hours that causes an employee to lose health benefits. The plan administrator must provide notice to individual employees of their right to elect COBRA coverage within 14 days after the administrator has received notice from the employer.

NOTE: The above information was provided by the U.S. Department of Labor.

Federal COBRA FAQs

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. 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.

What is the timeline 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 a COBRA 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, and has 45 days after electing coverage in which to pay the initial premium.

Who pays for COBRA coverage?
In most cases, the beneficiaries is 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.

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 either a termination of employment or a 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.

Can COBRA coverage be terminated early?
Coverage may end early if:

• Premiums are not paid on a timely basis.
• The employer ceases to maintain any group health plan.
• 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.
• 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 during which continued health coverage must be offered to qualified beneficiaries, COBRA does not prohibit plans from offering continuation health coverage that extends longer than the COBRA periods.

Some plans allow participants and beneficiaries to convert group health coverage to an individual policy. If this option is generally available from the plan, a qualified beneficiary who pays for COBRA coverage must be given the option of converting to an individual policy at the end of the COBRA continuation coverage period. The option must be given to enroll in a conversion health plan within 180 days before COBRA coverage ends. The premium for a conversion policy may be more expensive than the premium of a group plan, and the conversion policy may provide a lower level of coverage. The conversion option, however, is not available if the beneficiary ends COBRA coverage before reaching the end of the maximum period of COBRA 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.

What is the Federal Government's Role in COBRA?
COBRA continuation coverage laws are administered by several agencies. The Department of Labor and Department of Treasury have jurisdiction over private-sector health group health plans. The Department of Health & Human Services administers the continuation coverage law as it affects public-sector health plans.

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 Department of Labor and Department of Treasury share jurisdiction for enforcement of these provisions.

Can an individual receive COBRA benefits while on FMLA leave?
No. The Family and Medical Leave Act, effective August 5, 1993, 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.

If a member waives COBRA coverage during the election period can they 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.

Federal COBRA Employee Eligibility

How does a person become eligible for COBRA continuation coverage?
To be eligible for COBRA coverage, the employee must have been enrolled in the employer’s health plan when they 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, absent the COBRA continuation coverage, cause an individual to lose his or her healthcare coverage.

Who is entitled to benefits under COBRA?
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.

What are 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.

Employees

• Voluntary or involuntary termination of employment for reasons other than gross misconduct
• Reduction in the number of hours of employment

Spouses

• 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 becomes entitled to Medicare
• Divorce or legal separation of the covered employee
• Death of the covered employee

Dependent Children

• 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 becomes entitled to Medicare
• Divorce or legal separation of the covered employee
• Death of the covered employee

How long after a qualifying event does a person have to elect COBRA coverage?
Qualified beneficiaries must be given at least 60 days in which to make the COBRA 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 COBRA 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.

When does COBRA coverage begin?
COBRA coverage begins on the date that healthcare coverage would otherwise have been lost by reason of a qualifying event.

How long does COBRA coverage last?
COBRA establishes required periods of coverage for continuation 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 either 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.

Cal-COBRA Administration

What is Cal-COBRA?
The California Continuation Benefits Replacement Act (Cal-COBRA) is the Californian law that extends Federal COBRA benefits to employees and dependents of employees of small groups. It may also be available to individuals who have exhausted their Federal COBRA.

What groups are subject to Cal-COBRA?
Cal-COBRA applies to employers and group health plans that cover from 2 to 19 employees. Unlike Federal COBRA, church plans are covered under Cal-COBRA. It covers indemnity policies, PPOs, and HMOs. Self-insured plans are not included.

Who is responsible for administering Cal-COBRA?
Either the employer or a third-party administrator may administer Cal-COBRA. However, the legal obligation remains with the employer to comply with the law. To ensure they are in compliance, all employers should make certain that all administrative steps are completed in a timely manner.

What are the steps to administering Cal-COBRA?
Cal-COBRA administration requires four basic compliance components: Initial Notification, Timely Notice after a Qualifying Event, Installation & Maintenance, and Ending of coverage.

(1) Initial Notification
Notify all eligible group health care participants of their Cal-COBRA rights. Employers should provide a Cal-COBRA General Notice to all eligible group health care participants and their qualified beneficiaries within 90 days of becoming eligible to participate in the group health plan.

The General Notice must be included in the summary plan description (SPD), and employers must provide this to the employee, or send by first-class mail to the employee’s home address with the employee’s name and “& Spouse” or “& Family,” if applicable.

(2) Timely Notice After a Qualifying Event
Once a qualifying event has occurred, provide timely notice, within 14 days, of Cal-COBRA eligibility, enrollment forms, notice of the duration of coverage, and terms of payment to the eligible individual. Employers who are also plan administrators have 44 days to provide the election notice to the employee and any eligible dependents. Notices may be sent by first-class mail to the employee’s last known address.
Within 30 days of the qualifying event, the employer must notify the insurance carrier that a Cal-COBRA election form has been provided.

(3) Installation & Maintenance
Collect premiums and reinstate coverage. If Cal-COBRA is elected, insurance will be reinstated as of the date group coverage ended.

Once Cal-COBRA coverage is elected, the employer must allow 45 days from the date of election for the initial premiums owed to be paid. Once received, the employer must notify the insurance carrier to reinstate coverage.
If at any time during the Cal-COBRA period, premiums are not received by the stated due date, the employer must allow a 30-day grace period to receive the premium. If payment is still not received by the end of the grace period, the employer may terminate coverage. The written Notice of Termination of Coverage must include the following:

• Date of termination.
• Reason for early termination.
• Individuals’ rights under the law or the plan to elect alternative group or individual coverage.

If a Significant portion of premium is received, the employer must accept it as payment in full. They may send a notice indicating the amount due and give adequate time for the difference to be paid.

(4) Ending Coverage
Provide timely notices when the Cal-COBRA coverage end date is approaching. If Cal-COBRA coverage is not elected within 60 days of when the election notice was sent (not of when the qualifying event occurred) , the employer has met their obligation, and no further action is required.
Current or former employees not eligible for Cal-COBRA continuation coverage who request Cal-COBRA coverage must be sent a Notice of Unavailability of Continuation Coverage within 14 days of the employer receiving the notice of a qualifying event, explaining the reasons they are not eligible for continuation coverage.

Cal-COBRA may be terminated early under the following circumstances:

• Termination of all employer-provided group health plans.
• Failure to pay required premiums.
• A covered individual’s entitlement to Medicare.
• The individual becomes covered as an employee or dependent under another employer’s plan.

A written Notice of Termination of Coverage must be provided as soon as practicable to all qualified beneficiaries.

Cal-COBRA Employee Eligibility

Who is eligible for Cal-COBRA?
Employees, and their dependent spouses, domestic partners, and children who are enrolled under the employee, in the employer’s benefits plans at the time of a qualifying event are qualified beneficiaries and are eligible for Cal-COBRA.

Qualifying events include the following:

• Death of the covered employee.
• Termination or reduction of hours of the covered employee’s employment for reasons other than gross misconduct.
• Divorce or legal separation from a covered employee.
• A child’s loss of dependent status.
• The covered employee becoming entitled for Medicare.

If an individual meets one of the following criteria, they are no longer eligible for Cal-COBRA:

• Becomes covered under another group benefits plan that does not impose any pre-existing condition limitations affecting the individual.
• Becomes eligible for Federal COBRA.
• Becomes entitled to Medicare.
• Becomes eligible for Medi-Cal.
• Fails to notify the health plan of a qualifying event in the time specified by law (generally within 60 days).
• Fails to pay premiums on a timely basis.

How long is the Cal-COBRA coverage period?
Cal-COBRA allows individuals to continue their group health coverage for up to 36 months. This may be 36 months through Cal-CORBA or a combination of Federal COBRA and Cal-COBRA periods. See below for more details.

Can individuals apply for Cal-COBRA when they were covered by Federal COBRA?
When Federal COBRA ends, eligible employees may elect an additional 18 months of health coverage under Cal-COBRA. All qualified beneficiaries are generally eligible for continuation coverage for 36 months after the date the qualified beneficiary’s benefits would otherwise have terminated.

Example: An individual experienced a qualifying event and elected to continue coverage through Federal COBRA. After the 18 month period of Federal COBRA coverage, he may elect Cal-COBRA to maintain coverage for up to 18 additional months for a combined coverage period of 36 months.