Read on to find out details of COBRA continuation coverage, or jump to a section with these links:
What is COBRA continuation coverage?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage is to help you and your family avoid a gap in job-based health coverage. COBRA coverage gives employees and beneficiaries who experience a Qualifying Event the option to temporarily stay on your employer’s group health insurance plan (usually for up to 18 months).
Generally, all employer groups with 20+ employees that offer health benefits are required by federal law to offer COBRA coverage. Plans sponsored by state and local governments may be subject to similar provisions under the Public Health Service Act.
What benefits can be continued under COBRA?
COBRA) continuing coverage applies to group health plans, which can include medical, dental, vision, Health Reimbursement Arrangement (HRA), Flexible Spending Account (FSA) and Employee Assistance Program (EAP) benefits. The COBRA member has the option to select which eligible benefits that were in effect at the time of the qualifying event that they would like to continue receiving under COBRA.
Who Is entitled to continuation coverage under COBRA?
Qualified beneficiaries are those individuals who are covered under one or more of the employer’s group health plan benefits the day before the qualifying event:
Employees (including retired employees) who terminate employment (unless termination is due to gross misconduct)
The employee’s federally-recognized spouse (including the spouse of a retired employee); and
The employee’s dependent child(ren) (including the dependent child[ren] of a retired employee) as defined by the terms of the employer’s group health plan
A child who is born to, adopted by, or placed for adoption with a covered employee (including a retired employee) during a COBRA coverage period is considered a qualified beneficiary if enrolled according to the terms of the employer’s group health plan
A child of the covered employee receiving benefits due to a qualified medical child support order (QMSCO) – if enrolled according to the terms of the employer’s group health plan – is also entitled to COBRA coverage
Each qualified beneficiary has independent election rights under COBRA regulations. This means each person has their own right to COBRA coverage and they are entitled to make a separate election among the different types of coverage. However, a qualified beneficiary employee or spouse may not decline coverage on behalf of his or her spouse or non-minor children (if the spouse or non-minor child is a qualified beneficiary).
What are the COBRA Qualifying Events?
The following are the qualifying events that can give rise to COBRA election rights (if it results in a loss of coverage):
Voluntary or involuntary termination of covered employee’s employment (other than for gross misconduct)
Reduction in hours of employment for a covered employee
Death of a covered employee
Divorce or Legal Separation of the covered employee from the employee’s spouse
Dependent child ceases to be a dependent under the terms of the plan
Covered employee becomes entitled for Medicare benefits (typically, this will not be a qualifying event for spouses of active employees due to the Medicare Secondary Payer rules)
An employer’s bankruptcy (but only with respect to health coverage for retirees and their families)
How long does the COBRA continuing coverage benefit last?
By law employers must offer up to 18 months of continued coverage to qualified beneficiaries who lose coverage due to a qualifying event, although some circumstances allow for coverage up to 36 months.
Termination of employment (voluntary or involuntary, except for terminations due to the employee’s gross misconduct):
Coverage period is up to 18 months for covered employee, covered spouse and covered dependent children.
Reduction in hours of covered employee
Coverage period is up to 18 months for covered employee, covered spouse and covered dependent children.
Death of covered employee
Coverage period is up to 36 months for covered spouse and covered dependent children.
Loss of dependent status under the terms of the group health plan
Coverage period is up to 36 months for covered dependent children.
Employee entitled to Medicare
Coverage period is up to 36 months for covered spouse and covered dependent children (typically, this will not be a qualifying event for spouses of active employees due to the Medicare Secondary Payer rules).
If the employee becomes entitled to Medicare less than 18 months before her or his termination of employment or reduction in hours, COBRA coverage for qualified beneficiaries (other than the employee) who lose coverage due to the termination or reduction in hours may receive up to 36 months of COBRA from the date of the employee’s Medicare entitlement.
Divorce/Legal Separation of the covered employee
Coverage period is up to 36 months for covered spouse, covered dependent children (subject to the terms of the group health plan).
HealthEquity/WageWorks does not offer COBRA coverage beyond your maximum eligibility end date. We recommend you contact your insurance carrier(s) for more information about state continuation and/or an individual plan well before your end date occurs.
Cost of COBRA coverage
Employees and their eligible dependents who experience a qualifying event (such as employment termination, divorce, or death of a spouse) can elect to continue the same employer benefits coverage in place immediately prior to the event.
The COBRA qualified beneficiary is generally responsible for the full cost of the benefits (that is, both employer and employee contribution amounts) plus any administration fees, which can be up to 2% of the total benefit cost (or, in the case of an extension of COBRA coverage due to a Social Security disability, 150 percent when COBRA coverage includes the disabled person).
Are there alternatives to COBRA coverage?
There may be other, more affordable coverage options for a former employee and their family through the Health Insurance Marketplace, Medicaid, or other group health plan coverage options, such as a spouse’s plan. An employee or dependent who has lost job-related health coverage may be eligible to participate in a “special enrollment period,” which allows them to choose different coverage options without waiting for open enrollment. For example, an employee who loses group health coverage may be able to enroll in a spouse’s health plan. The employee or dependent must request “special enrollment” within 30 days of losing coverage.
For questions regarding the Marketplace, please go to www.HealthCare.gov or call 800.318.2596. If you would like information regarding affordable alternatives to COBRA, please contact our affiliate company HealthCompare at 855.837.6593 or online at StayingCovered.com.