Everything You Need to Know About COBRA

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COBRA Webinar
By:
Larry Grudzien
Attorney at Law
2
Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC

What is COBRA?
• An employer must offer covered employees and/or qualified beneficiaries:
 Continued medical, dental and/or vision coverage.
 Over a specified period of time.
 Paid entirely by the covered employee or the qualified beneficiary.
 Triggered by defined events which would cause loss of coverage.
 Unless the covered employee’s employment was terminated due to gross
misconduct.
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What is Gross Misconduct?
• COBRA contains no definition of gross misconduct.
• Based solely on the legislative history, it is clear that termination for gross
misconduct is not the same as termination simply “for cause.”
• Unfortunately, the courts have not agreed on a common standard to apply in gross
misconduct cases.
• Certain federal courts have looked to the unemployment insurance laws of the
state in which the court sits because these laws often deny unemployment
benefits to employees terminated for “gross misconduct,” “misconduct” or
“willful misconduct.”
• One court fashioned the following definition: “Gross misconduct may be
intentional, wanton, willful, deliberate, reckless or in deliberate indifference to the
employer's interest.
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When Must Covered Employees
be Informed of COBRA Rights?
• Twice:
 When employee first enters employer’s medical, dental, vision and or health
flexible spending account plan (initial notice).
 Later at qualifying event.
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When Must Covered Employees
be Informed of COBRA Rights?
• When must initial general notice be given?
 Within 90 days after coverage begins
 Model initial general notices are available
• How must notices be provided?
 Mailed
 Provided in SPD
• What information must be provided?
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Initial Notice
• This notice must contain the following items:
 Name of the employer’s plan.
 Name, address and telephone number for plan administrator or (if different)
COBRA administrator (Only the party or parties responsible for providing
information about the plan and COBRA upon request needs to be indicated).
 An explanation of the importance of keeping the plan administrator informed of
the participant’s or qualified beneficiary” current address.
 A description of the plan’s requirements for qualified beneficiary to provide the
notice of qualifying events and the plan’s procedures of providing such notices.
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 Other options are available to an individual when he or she lose group health
coverage.
▪ In individual may be eligible to buy an individual plan through the Health Insurance
Marketplace.
▪ By enrolling in coverage through the Marketplace, an individual may qualify for lower costs
on your monthly premiums and lower out-of-pocket costs.
▪ Additionally, an individual may qualify for a 30-day special enrollment period for another
group health plan for which he or she is eligible (such as a spouse’s plan), even if that
plan generally doesn’t accept late enrollees.
 There are other coverage options besides COBRA Continuation Coverage
▪ Instead of enrolling in COBRA continuation coverage, there may be other coverage
options for the individual and his or her family through the Health Insurance Marketplace,
Medicaid, or other group health plan coverage options (such as a spouse’s plan) through
what is called a “special enrollment period.”
▪ Some of these options may cost less than COBRA continuation coverage.
▪ An individual can learn more about many of these options at www.healthcare.gov.
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Initial Notice

 A description of the COBRA coverage made available under the plan, including:
▪ Identification of classes of individuals who may become qualified beneficiaries;
▪ The types of qualifying events that gives rise to the right to COBRA coverage;
▪ The obligation of the employer to notify the plan administrator of the occurrence of
certain qualifying events;
▪ The maximum period for which COBRA coverage may be available;
▪ When and under what circumstances COBRA coverage may be extended beyond the
maximum period; and
▪ The requirements for the payment of COBRA premiums. and
 A statement that the notice does not fully describe COBRA coverage or other
rights under the employer’s plan and more complete information is available in
the summary plan description.
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Initial Notice

What Benefits Must be
Provided in COBRA Coverage?
• Covered employees and other qualified beneficiaries must be offered same medical,
dental and/or vision coverage available when covered employee was active .
• Cafeteria plan availability.
• Changes to employer’s coverage.
• Qualified beneficiaries will have opportunity to change elections at next open
enrollment.
• May add other coverages at next open enrollment.
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Health Care FSAs Under
COBRA
• To determine whether an account is overspent, an employer must examine
the claims activity for a specific qualified beneficiary.
• The determination of whether a qualified beneficiary's account for a plan
year is overspent or underspent as of the date of the qualifying event
depends on three variables:
 the elected annual limit for the qualified beneficiary for the plan year (e.g., $2,400
of coverage);
 the total reimbursable claims submitted to the health FSA for that plan year
before the date of the qualifying event; and
 the maximum amount that the health FSA is permitted to require to be paid for
COBRA coverage for the remainder of the plan year.
• The elected annual limit less the claims submitted is referred to as the
“remaining annual limit.” If the remaining annual limit is less than the
maximum COBRA premium that can be charged for the rest of the year,
then the account is overspent.
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HRAs Under COBRA
• HRAs are subject to COBRA requirements.
• Qualified beneficiaries will have access to unspend HRA balance and will
be entitled to additional HRA accruals that active employees receive.
• Each qualified beneficiary will have an independent right under COBRA
to continue coverage that was available immediately preceding the
qualifying event.
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Who is a Qualified Beneficiary?
• Covered spouse and/or dependent children who were covered and suffered
loss of coverage.
• If a dependent not enrolled at time of qualifying event, he or she is not
considered qualified and not eligible for COBRA coverage.
• Why is determining if a dependent is a “qualified beneficiary so important? -
independent rights to elect COBRA.
• May a Qualified Beneficiary add new dependents?
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What Triggers COBRA
Coverage?
• There must a loss of coverage due to:
 The covered employee’s death,
 A change in the covered employee’s employment status—such as the covered
employee’s termination of employment from the employer or reduction in
working hours,
 The covered employee’s divorce or legal separation,
 The bankruptcy of the employer,
 The covered employee or any qualified beneficiaries are on military leave,
 The covered employee elects Medicare as primary coverage, or
 The covered employee’s dependent child loses eligibility for coverage.
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Family and Medical Leave
• If an employee takes FMLA leave , it is generally not considered a
qualifying event under COBRA.
• A qualifying event will have incurred if three conditions are satisfied:
 The covered employee (or spouse or dependent) is covered on the day before
the first day of FMLA leave under employer’s medical dental and/or vision plan
 The employee does not return to work at the end of FMLA leave, and
 The employee would, in the absence of COBRA coverage, lose coverage under
the employer’s health plan before the end of the maximum period.
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• A qualifying event would occur on the last day of FMLA leave.
• The maximum coverage period should be measured from the date of the
qualifying event.
• If coverage under the group health plan is lost at a later date and the plan
provides for the extension of the required period, then the maximum
coverage period would be measured from the date when coverage is lost.
• A qualifying event still may occur if an employee fails to pay the covered
employee portion of premiums for coverage under the health plan during
FMLA leave, or declined coverage under a group health plan during FMLA
leave.
• A determination of when a qualifying event occurs is not affected by any
state or local law that requires coverage under a group health plan to be
maintained during leave of absence for a longer period than that required
under FMLA.
• A right to COBRA coverage may not be conditioned upon reimbursement of
the premiums paid by the employer for coverage under a group health plan
during FMLA leave.
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Family and Medical Leave

What is the Maximum Length
of COBRA Coverage?
• 18 months - covered employee’s termination.
• 11 month extension – disability.
• 36 months - covered employee’s divorce or death
• Second qualifying event - covered employee’s termination followed by
death or divorce - coverage period?
• Medicare Eligibility before elect COBRA – 36 months for spouse and
dependents measured from date of Medicare eligibility.
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When can an Employer Terminate
COBRA Coverage Early?
• Coverage can be terminated early if:
 The covered employee or a qualified dependent fails to make a timely COBRA
premium payment.
▪ Initial premium must be received within 45 days of election of COBRA coverage.
▪ Subsequent premium is due the first day of each month and must be paid with 30 days
from due date.
 The covered employee or a qualified dependent receives coverage under another
group plan.
 The employer terminates all health plans.
 The covered employee or a qualified dependent becomes entitled to Medicare
 Determination is made that the covered employee or a qualified dependent is no
longer disabled.
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Must a Notice be Given if COBRA
Coverage Terminates Early?
• Yes - a plan administrator must give notice.
• Provided as soon as administratively practicable after termination .
• Notice contents.
• Notice can be combined with a certificate of creditable coverage.
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• Covered employees must notify the employer of:
 Divorce or legal separation if dependent loses eligibility -60 days from later of
qualifying event or loss of coverage
 A dependent child's losing dependent status under the plan - 60 days from later
of qualifying event or loss of coverage.
 Second qualifying event - 60 days from date of second qualifying event.
 Disability determination - 60 days from later of date of SSA disability
determination, date of qualifying event, or date of loss of coverage; and within 18
months from the date of the qualifying event.
 Change in disability status -30 days after the date SSA determines qualified
beneficiary is no longer disabled.
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What Notice Must be Given
to the Employer?

• Employers may deny COBRA coverage if proper notice is not given.
• Qualify for 11 month extension for disability:
 Notify within 60 days of disability determination.
 Not later than the end of 18 month COBRA coverage period.
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What Notice Must be Given
to the Employer?

Must a Second COBRA Rights
Notice be Provided?
• Covered employee and qualified beneficiaries must be informed of COBRA
rights within a specified time after the qualifying event.
• Who must be provided this notice? - Covered employee and qualified
beneficiaries.
• When must the notice be provided? - After receiving notice of qualifying
event, employer must notify PA within 30 days, PA has 14 days to provide
notice, 44 days of employer is also PA.
• How must the notice be provided?
• What information must be provided in the notice?
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 The name of the employer’s plan;
 The name, address and telephone number of the party responsible for COBRA
administration;
 The identification, by name or status, of the each qualified beneficiary and their
period of coverage
 An explanation of the importance of keeping the plan administrator informed of
the participant’s or qualified beneficiary” current address;
 A description of the qualifying event;
 The COBRA coverage made available;
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Election Notice

 The maximum period of COBRA coverage available;
 COBRA coverage termination date;
 Events that may cause early termination of COBRA coverage
 Manner in which the qualified beneficiaries must exercise their COBRA rights,
including an explanation of the election time periods;
 A statement that each qualified beneficiary must have an independent right to
elect COBRA coverage;
 Payment requirements;
 Payment schedule;
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Election Notice

 Payment policies (including grace periods and the consequences of late
payment or nonpayment);
 A statement that the notice does not fully describe COBRA coverage or other
rights under the employer’s plan and more complete information is available in
the summary plan description;
 Consequences of not electing COBRA coverage (The notice must explain that a
covered employee or qualified beneficiary may lose rights under HIPAA by not
electing COBRA coverage.); and
 Information on possible extensions of the 18 month period due to disability or
second qualifying event.
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Election Notice

 Alternatives to COBRA coverage are available through the Marketplace;
 A premium tax credit may be available to help pay for some or all of the cost of
coverage through the Marketplace, and being eligible for COBRA does not limit
eligibility for this tax credit;
 Special enrollment opportunities may exist in other group health plans for which
qualified beneficiaries are eligible if they request enrollment within 30 days; and
 There are limitations on a plan's ability to impose a preexisting condition
exclusion, and such exclusions will be prohibited beginning in 2014.
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Election Notice

How is COBRA Coverage
Elected?
• COBRA Coverage must be elected within 60 days of notification.
 Complete and return forms by deadline.
• Election to waiver coverage:
 Election may be revoked before end of election period.
• The initial premium is due within 45 days after the election of COBRA
coverage.
• A subsequent premium payments “shall be considered timely if made
within 30 days after the date due or within such longer period as applies to
or under the plan.”
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What are COBRA Election Rights
of Qualified Beneficiaries?
• Each Qualified Beneficiary may independently elect or waive COBRA
coverage.
• Covered employee may elect for other dependents.
• Qualified dependents may make separate election.
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What is the Premium Cost for
COBRA Coverage?
 Each covered employees and qualified beneficiary is charged a premium
on the total cost for “similarly situated” employee.
 The premium cost may not exceed 102% of the applicable plan option
premium cost.
 Disabled employees on the special 11-month extension may be charged
up to 150% of the applicable plan premium.
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What are the Other Notice
Requirements?
• Notice from the employer to the plan administrator:
 30 days from the date coverage ceased.
• Notice to employee or dependent who gives notice of a qualifying event
but is not eligible:
 Notice must explain why they are not eligible.
• New notices effective for plan years beginning after November 26, 2004.
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• Entitlement of Medicare may terminate COBRA coverage.
 When any qualified beneficiary (including the covered employee) first becomes
entitled to Medicare after electing COBRA coverage, his or her COBRA coverage
can be terminated early (i.e., before the end of the maximum coverage period.)
 This rule does not, however, affect the COBRA rights of other qualified
beneficiaries in a family unit who are not entitled to Medicare (for example, the
spouse and dependent children of a Medicare-entitled former employee.
31
Medicare

• Entitlement to Medicare extend the period of COBRA coverage.
 When a covered employee’s qualifying event (i.e., a termination of employment
or reduction of hours) occurs within the 18-month period after the employee
becomes entitled to Medicare, the employee’s spouse and dependent children
(but not the employee) become entitled to COBRA coverage for a maximum
period that ends 36 months after the covered employee becomes entitled to
Medicare.
 The covered employee remains entitled to a basic maximum period that ends 18
months after the termination of employment or reduction of hours.
32
Medicare

• Entitlement to Medicare before electing COBRA does not terminate
COBRA coverage.
 When any qualified beneficiary (including the covered employee) is entitled to
Medicare before electing COBRA, he or she still has the right to elect COBRA
coverage.
 The COBRA offer cannot be withheld because of Medicare entitlement. And
this coverage may not be terminated early because of the Medicare
entitlement.
33
Medicare

• Enrolling in COBRA does not preserve an employee’s special enrollment
rights under Medicare.
 COBRA coverage is not considered a group health plan based upon current
employment.
 Individuals who, in order to retain their COBRA coverage, do not enroll in
Medicare when first eligible will not have special enrollment rights under
Medicare and may expect to pay more for Medicare when COBRA coverage
ends.
34
Medicare

• A plan must still offer COBRA coverage to retirees when alternative retiree
coverage is offered.
 Alternative retiree coverage might be offered under the plan covering active
employees, or it might be offered under a separate retiree plan.
 In either case, the employer cannot avoid its obligation to offer COBRA coverage
in connection with the employee’s retirement simply by providing alternative
retiree coverage.
35
Medicare

• A plan does not have to offer COBRA to retirees when alternative retiree
coverage expires.
 The regulations make it clear that if a retiree (and his or her family) are offered
but do not elect COBRA and instead choose alternative retiree coverage available
for a fixed period of time, no COBRA election must be offered when the retiree
coverage expires.
 This result would be the same whether retiree coverage is offered under a
combined retiree/active plan or under a retiree-only plan.
36
Medicare

• If an employee loses coverage because of termination of employment or
reduction of hours and is offered COBRA, it is considered a special
enrollment event under the Marketplace.
• Once an employee elects COBRA, but stay until next open enrollment on
the Marketplace.
• Losing COBRA coverage for nonpayment of premium is not considered a
special enrollment event.
37
Marketplace

ILLINOIS CONTINUATION
COVERAGE
38

• What continuation coverages are offered?
 To employees & dependents who lose their group health insurance coverage with
an employer group of any size due to termination of employment or reduction in
hours .
 To spouse & dependent children who lose group health insurance coverage due to
death or retirement of the employee or divorce from the employee.
 To dependent children who lose their group health insurance coverage with an
employer group of any size due to:
▪ Attainment of the limiting age under the policy; or
▪ The death of the insured parent (and coverage is not available under the Spouse
Continuation Law).
39
Illinois Continuation Coverage

• Which Employers Must Offer Continuation Coverage Under The Illinois
Law?
 Employers offering fully insured group and accident health plans, regardless of
the group's size.
 Employers offering fully insured HMO coverage, regardless of the group's size.
40

• The Illinois law does not apply to:
 Self-insured employers,
 Self-insured health and welfare benefit plans, such as union plans, or
 Insurance policies or trusts written in other states.
• Note: For HMOs, the law does apply to contracts written outside of Illinois
if the HMO member is a resident of Illinois and the HMO has established a
provider network in Illinois .
• To determine if the HMO coverage provides Illinois continuation, contact
the HMO or check the certificate of coverage.
41

• What Benefits Are Available With Illinois Continuation Coverage?
 Benefits for hospital, surgical or major medical are the same as they were
under the previous group coverage.
42

• How Much Will Illinois Continuation Coverage Cost?
 The premium for Illinois continuation coverage for the employee, his or her
spouse and dependent children may not exceed that of the group rate.
 The employee is responsible for paying the entire premium for the coverage,
including the portion which was formerly paid by the employer.
 After the initial two years of coverage, the premium may be adjusted to include a
20% administration fee for coverage under the Spousal Continuation coverage.
43

• Who Is Eligible For Continuation Coverage Under The Illinois Law?
 Continuation of coverage must be offered to the employee and eligible dependents
who were continuously covered under group coverage for 3 months prior to
termination of employment.
• Illinois continuation does not apply if:
 An employee is terminated for committing a work-related felony and has admitted
to or been convicted of such felony.
 An employee is terminated for a work-related theft for which the employer was in
no way responsible and the employee has admitted to or been convicted of such
theft
 An employee is covered by Medicare .
 An Employee is covered by any other insured or self-insured plan with group
hospital, surgical or medical coverage.
44
-Employee-

• What Are The Notice Deadlines?
 An employer must notify the employee in writing of his or her right to continuation
coverage within 10 days of termination of his or her employment
 The employee must request such continuation in writing within the 30-day period
following the later of: 1) the date of employment termination or 2) the date the
employee is given written notice of his or her right to continuation.
 IN NO EVENT, may an employee elect continuation coverage more than 60 days
after the date of employment termination.
45
-Employee-

• How Long Does Illinois Continuation Coverage Last?
 Continuation coverage must be provided for 12 months after the date the
insurance coverage ends because employment is terminated or the employee’s
hours are reduced.
 Continuation coverage may terminate earlier than 12 months if:
▪ The employee becomes eligible for Medicare;
▪ The employee is covered by any other insured or self-insured group medical, hospital or
surgical plan;
▪ The employee fails to make timely premium payments for coverage or
▪ The employer's group policy is terminated in its entirety and not replaced with another
group policy.
46
-Employee-

• Who Is Eligible for Spousal Continuation Coverage?
 Spousal continuation is triggered when one of the following qualifying events
occurs: divorce from the employee, death of the employee or retirement of the
employee.
 Spousal continuation then applies to:
▪ The divorced or widowed spouse and dependent children of the employee who were
covered under the group plan on the day before the qualifying event.
▪ The spouse and dependent children of a retired employee, if the spouse is age 55 or
older, who were covered under the group plan on the day before the qualifying event.
47
-Spouse-

• What Are the Notice Deadlines?
 The spouse must notify the employer and insurer in writing of the dissolution of
marriage or the death or retirement of the employee within 30 days of the
qualifying event.
 The employer must notify the insurer within 15 days after receiving his or her
request for spousal continuation .
 The insurance company must notify the spouse of the right to continuation by
certified mail, return receipt requested, within 30 days after receipt of the notice
from the employer.
 The spouse must return the notice of continuation election form by certified
mail, return receipt requested, within 30 days after the date of mailing receipt
from the insurance company.
48
-Spouse-

• How Long Does Spousal Continuation Last?
 Continuation resulting from an employee's death or divorce shall be offered for
2 years if the spouse is under age 55 at time of election .
 If the spouse is age 55 or older at the time of election, coverage will be provided
until eligible for Medicare.
 Continuation resulting from an employee's retirement is only available to
spouses who are age 55 or older at the time of the retirement. Such coverage
will be provided until the spouse is eligible for Medicare.
49
-Spouse-

• Spousal continuation may terminate earlier than the specified timeframe
if:
 The spouse fails to make timely premium payments;
 The group coverage would terminate even though the spouse was still married
to the employee (unless the employee retires during the election period);
 The spouse becomes an insured employee under any other group health plan;
or
 The spouse remarries.
50
-Spouse-

• Who Is Eligible For Continuation Coverage Under The Illinois Dependent
Child Continuation Law?
 Continuation of coverage must be offered to eligible dependents covered under
group coverage on the day before the qualifying event.
 Illinois dependent child continuation does not apply if:
▪ The child is covered by any other insured or self-insured group plan .
▪ The child is eligible for coverage under the Illinois Spousal Continuation Law.
51
-Dependent Children-

• What Are The Notice deadlines?
 The dependent child or responsible adult acting on behalf of the dependent child
must notify the employer or the insurer in writing of the qualifying event within
30 days of the event.
52

• How Long Does Illinois Dependent Child Continuation Coverage Last?
 Continuation coverage must be provided for a maximum of two years after the date
the insurance ends because of attainment of the limiting age or death of insured
parent.
• Continuation coverage may terminate earlier than two years:
 If premiums are not made in a timely manner;
 When coverage would terminate under the terms of the policy if the dependent
child was still an eligible dependent of the employee, such as when the employee
terminates employment with the employer ; or
 When the dependent child becomes an insured employee under any other group
health plan.
53

Questions?
54Copyright 2014- Not to be reproduced without express permission of Benefit Express Services, LLC

Contact Information
• Larry Grudzien, Attorney at Law
 Phone: 708-717-9638
 Email: larry@larrygrudzien.com
 Website: www.larrygrudzien.com
55

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