Q: What employers are subject to COBRA?
A: In general, an employer is subject to COBRA if it maintains or contributes to a group health plan for the benefit of providing health care to employees, former employees and their families. There are three groups exempt from COBRA: (1) certain governmental entities; (2) church plans and (3) small employers. A small employer plan is defined below.
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Q: When are we subject to COBRA?
A: To determine if your company is subject to COBRA for the present calendar year, you must review your employee work force data during the "look back" period of the previous calendar year. In general, a small-employer plan is not subject to COBRA. A small employer plan is defined as an employer that normally employed fewer than 20 employees during the preceding calendar year. An employer is considered to have normally employed fewer than 20 employees during a particular calendar year if, and only if, it had fewer than 20 employees on at least 50 percent of its typical business days during that year. Other factors must be taken into account when determining the employee count. Please contact COBRA Administrator if you have further questions.
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Q: What plans are subject to COBRA?
A: A plan is subject to COBRA if it is maintained by an employer or employee organization to provide health care to individuals who have an employment-related connection to the employee or employee organization or to their families. This includes any employer-sponsored medical, dental, vision or prescription drug program. In addition, certain health flexible spending accounts, mental health plans, drug and alcohol treatment programs, employee assistance plans (EAPs) intended to relieve or alleviate a physical condition or health problem, chiropractic programs and any self-insured arrangements that provide similar benefits are also subject to COBRA. One or more individual insurance polices may be subject to COBRA if the arrangement involves the provision of health care to two or more employees.
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Q: What is an Initial COBRA Notification?
A: The Initial COBRA Notification, sometimes referred to as a "Model Notice," is a required general notification of COBRA rights that must be sent to each insured employee and covered spouse when plan coverage begins. COBRA Administrators often provide an optional service to perform the Initial COBRA Notification on behalf of employer clients. Clients who do not choose our optional service are responsible for providing this notice.
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Q: Can I distribute the Initial COBRA Notification by hand to my employees or insert it as a payroll stuffer?
A: No, these methods of distributing the Initial COBRA Notification are not recommended. To demonstrate good faith compliance, the Initial COBRA Notification must be sent by first class mail to the last known mailing address of each insured employee and covered spouse when a company first becomes subject to COBRA. Then, on an on-going basis, the Notice must be provided by first class mail whenever an individual is added to the plan, for example, at open enrollment or upon new-hire eligibility. This document provides important information pertaining to an employee or spouse’s responsibility to notify the employer of certain events such as divorce or legal separation. Distribution of this important document by any other means, such as by hand or as a payroll stuffer, would not demonstrate good faith compliance with the law.
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Q: What is a COBRA qualifying event?
A: 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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Q: What is the purpose of the qualifying event notice?
A: Unlike the initial notice, which highlights covered participant’s 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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Q: Who has to be notified?
A: 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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Q: We have an employee who is terminating employment, but he is 65, do we have to offer him COBRA?
A: Yes, you must offer him COBRA.
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Q: We have an employee who is entitled to Medicare and also has coverage under our group health plan. If he has a qualifying event, do we have to offer him COBRA?
A: Yes.
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Q: An employee just requested that we drop his coverage at the end of the month because he is obtaining coverage through his wife’s employer. Is this a qualifying event?
A: No. An employee has the right to request that his own health coverage be dropped. Since this is generally a voluntary action on the part of the employee and not in connection with a COBRA qualifying event, continuation coverage need not be offered. However, you should be aware of actions taken "in anticipation of" a future qualifying event.
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Q: How many days does an employee have to be covered by the health insurance plan in order to be eligible for COBRA coverage?
A: 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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Q: Once a qualified beneficiary has elected, how many days does he have to pay for the coverage?
A: 45 days measured from the date of election.
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Q: How much can I charge a qualified beneficiary for COBRA coverage?
A: In general, employers can charge up to 100% of the cost for coverage, plus an additional 2% administrative fee, for a total of 102%.
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Q: Who must pay COBRA premiums for continuation coverage?
A: COBRA allows the employer to charge for continuation coverage, but the law excludes any reference as to who must make a required premium payment. In most cases, the COBRA participant, or "qualified beneficiary" pays any required premiums for continuation coverage. However, it is permissible for a third party to make COBRA payments on behalf of a qualified beneficiary. For example, a qualified beneficiary may be entitled to certain state-run programs in which Medicaid agencies pay for the cost to maintain COBRA continuation coverage. Or, a divorce decree may require an active employee to pay for continuation coverage on behalf of an ex-spouse. In any case, the qualified beneficiary carries the risk that the third party entity pays late or not at all, resulting in termination of coverage with no possibility of reinstatement.
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Q: Can I terminate a qualified beneficiary’s coverage for failure to make timely payment?
A: Yes, you may terminate COBRA coverage for late or non-payment of premiums. Here are other reasons that COBRA continuation coverage can be terminated: A written request for termination made by the qualified beneficiary, Completion of 18-, 29-, or 36-month continuation coverage period, Employer elimination of group health benefits (including successor plans), Qualified beneficiary obtains other group health coverage, after the date of COBRA election, that does not include an applicable exclusion or limitation for any pre-existing condition, Qualified beneficiary becomes entitled to Medicare, after the date of COBRA election, For cause, on the same basis that the plan terminates for cause the coverage of similarly situated non-COBRA beneficiaries, or For an 11-month disability extension, a final determination is made that the individual is no longer disabled.
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Q: What is the grace period on monthly COBRA premiums?
A: 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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Q: If I'm going to cancel COBRA coverage on a qualified beneficiary for non-payment of premium, am I required to notify them?
A: 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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Q: My carrier increases their rates twice a year. Can I pass along these rate increases to my COBRA participants?
A: The law limits the conditions when the applicable premium may be increased during a determination period. A determination period is any 12-month period selected by the plan that is applied consistently from year to year. During a determination period, a plan can increase the premium only in the following three cases: (1) The plan has previously charged less than the maximum amount permitted and the increased amount required to be paid does not exceed the maximum amount permitted; or (2) The increase occurs during a disability extension and the increased amount required to be paid does not exceed the maximum amount permitted; or (3) A qualified beneficiary changes the coverage being received. Because the law is clear in its guidance for premium increases, it is advisable to consult your benefits professional or legal counsel when passing on rate increases to COBRA participants for reasons not stated above.
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Q: Can a COBRA participant elect dental coverage’s during an open enrollment period, even though they didn’t have dental while an employee?
A: Yes. If an employer makes an open enrollment period available to similarly situated active employees, the same open enrollment period rights must be made to each qualified beneficiary receiving COBRA continuation coverage. Open enrollment would allow a COBRA participant to choose to be covered under another group health plan or under another benefit package within the same plan, or to add or eliminate coverage of family members.
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Q: 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?
A: 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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Q: A single covered employee quits and elects COBRA coverage. He then marries while on COBRA. Can he add his new spouse to the plan?
A: 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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