COBRA Qualifying Events , coverage, definitions and Premiums

by | Aug 20, 2022 | CPT modifiers

What is COBRA Qualifying Events

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that requires most employers to provide former employees and dependents who lose group health benefits due to a qualifying event with an opportunity to continue group health coverage for a limited period of time.

Most employer-sponsored group health plans are subject to COBRA’s continuation coverage requirements. Under COBRA, an employer must offer continued coverage to a qualified beneficiary when group health coverage ends (or would end) due to a qualifying event. COBRA includes a specific list of seven events that can be considered qualifying events if they result in a loss of group health coverage.

This Compliance Overview provides information about each type of qualifying event, the individuals to whom a coverage offer must be made and how long the continuation coverage must extend.

QUALIFYING EVENTS

An employer that is subject to COBRA must offer continuation coverage only when group health plan coverage ends (or would end) due to a qualifying event. COBRA includes the following specific list of seven events that can be considered qualifying events if they result in a loss of group health plan coverage:

  1. Termination of a covered employee’s employment (other than for gross misconduct)
  2. A reduction of a covered employee’s hours of employment
  3. A divorce or legal separation from the covered employee
  4. The death of a covered employee
  5. Ceasing to be a dependent child under the terms of the plan
  6. The covered employee’s entitlement to Medicare
  7. Employer bankruptcy (for retiree plans)
    If an employee or dependent loses group health plan coverage for a reason that is not a COBRAqualifying event, the employer is not required to offer COBRA coverage. Similarly, if the qualifying event does not cause a loss of group health coverage, the employer is not required to offer COBRA coverage.

COBRA coverage must be offered to qualified beneficiaries when:

  • A qualifying event occurs when the health plan is subject to COBRA; and
  • The qualifying event causes a loss of coverage under the plan for a covered employee, covered spouse or covered dependent child.

IMPORTANT DEFINITIONS

Plans Subject to COBRA

Almost all employers with group health plans must comply with COBRA, including corporations, partnerships and tax-exempt organizations.
There is a small employer exception to COBRA—an employer’s group health plan is not subject to COBRA if the employer normally employed fewer than 20 employees during the preceding calendar year.

Qualified Beneficiaries

Under COBRA, a qualifying event triggers an obligation to offer COBRA coverage to qualified beneficiaries.

Each qualified beneficiary has an independent right to elect COBRA. For example, if an employee and his or her spouse were covered under the health plan on the day before the qualifying event, the spouse may elect COBRA even if the employee declines coverage.

Maximum Coverage Period
The period of COBRA coverage offered to qualifying beneficiaries is known as the “maximum coverage period.” The length of the maximum coverage period depends on the type of qualifying event that has occurred. It is:

  • 18 months for a termination of employment or reduction in hours; and
  • 36 months for all other qualifying events.
    There are situations where the maximum coverage period can be extended (due to disability or a second qualifying event) or terminated early (for example, when COBRA premiums are not paid).
    Qualifying Events
    A qualifying event is any one of the seven specified events that occurs while a health plan is subject to COBRA and that results in a loss of coverage to a covered employee, covered spouse or a covered dependent child. There are some situations that are not considered qualifying events that require COBRA coverage to be offered.

For example, a cancellation of health plan coverage—whether at the employee’s request or because of the employee’s failure to pay premiums—is not, by itself, a qualifying event that triggers the requirement to offer COBRA coverage. Likewise, cancelling coverage for an ineligible individual who was mistakenly covered by the health plan is not a qualifying event for COBRA purposes.

To lose coverage means to cease to be covered under the same terms and conditions that were in effect immediately before the event. Often, there is a complete loss of coverage due to a qualifying event (for example, a complete loss of health plan coverage following an employee’s termination of employment). However, even a partial loss of coverage can trigger COBRA rights. For example, a loss of coverage includes an increase in employee premiums or contributions as a result of a qualifying event.

Coordination with Other Federal Benefit Laws

The Family and Medical Leave Act (FMLA) 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. Group health coverage that is provided under the FMLA during a family or medical leave is NOT
COBRA continuation coverage, and taking 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 taking FMLA leave decides not to return to work and notifies an employer of his or her intent not to return to work.

The Affordable Care Act (ACA) provides additional protections for coverage under employment-based group health plans, including COBRA continuation coverage. These include:

• Extending dependent child coverage to age 26;
• Prohibiting limits or exclusions from coverage for preexisting conditions;
• Banning lifetime or annual dollar limits on coverage for essential health benefits; and
• Requiring group health plans and insurers to provide an easy-to-understand summary of a health plan’s benefits and coverage.

Additional protections that may apply to your employer’s plan include coverage for:
• Certain preventive services (such as blood pressure, diabetes and cholesterol tests, regular well-baby and wellchild visits, routine vaccinations and many cancer screenings) without cost sharing, and
• Emergency services in an emergency department of a hospital outside your plan’s network without prior approval from your health plan.
Medicare is the Federal health insurance program for people who are 65 or older and certain younger people withdisabilities or End-Stage Renal Disease. If you are enrolled in Medicare as well as COBRA continuation coverage, there may be special coordination of benefits rules that determine which coverage is the primary payer of benefits. Check your Summary Plan Description to see if special rules apply or ask your plan administrator.

Qualifying Events for COBRA Eligibility For Employee / Former Employee:

  • The termination of your employment and loss of benefits (for reasons other than gross misconduct on your part).
  • Reduction in your scheduled work hours of employment resulting in loss of benefit eligibility.
  • If you are a retiree, your employer has filed for Chapter 11 reorganization.

Note: Since 2000, reduction in hours followed by an increase in employee contribution has also been deemed a qualifying event to allow COBRA coverage to be taken. At the same time retiree coverage under a bankruptcy has been amended to include a substantial elimination of coverage within 12 months before or after the date bankruptcy proceedings began.
For Spouse of Employee / Former Employee:

  • The death of your spouse.
  • A termination of your spouse’s employment and loss of benefits (for reasons other than gross misconduct), or reduction in your spouse’s scheduled work hours of employment resulting in loss of benefit eligibility.
  • Divorce or legal separation from your spouse.
  • Your spouse becomes entitled to Medicare benefits (if loss in coverage occurs).
  • Your spouse is a retiree and your spouse’s employer files for Chapter 11 reorganization.
    For Dependent Child of Employee / Former Employee:
  • The death of a parent.
  • The termination of a parent’s employment and loss of benefits (for reasons other than gross misconduct) or reduction in a parent’s scheduled work hours of employment resulting in loss of benefit eligibility.
  • Parent’s divorce or legal separation.
  • A parent becomes entitled to Medicare benefits and would lose group coverage (if loss in coverage occurs).
  • The dependent ceases to be a “dependent child” under the group health plan.
  • The parent is a retiree and the parent’s employer files for Chapter 11 reorganization.

Note: If, as an employee, you go out on a qualified leave under the Family and Medical Leave Act of 1993, special rules apply. The COBRA Qualifying Event will not start until you notify the company, during the leave period, that you will not be coming back or if you do not return at the end of the leave period.
Under the law, the employee or a family member has the responsibility to inform the Benefits Department of your employer (or former employer) of a divorce, legal separation, or a child losing dependent status under the group health plan within 60 days of this Qualifying Event. There is also a 60-day notification requirement for informing the Plan Administrator of a disability award from the Social Security Administration to qualify for the possible disability extension.

COBRA Election Period and Coverage

At the time that a qualifying event has occurred, the (department name) will notify covered individuals (also known as qualified beneficiaries) of their rights to elect COBRA continuation coverage. The term “qualified beneficiary” means, a covered individual that is eligible to continue coverage because of a qualifying event. An
exception is a newborn or child placed for adoption can be added to COBRA coverage and will be deemed a qualified beneficiary, although not covered at the event date.

Each individual who is covered under the plan on the day before an event occurs is a “qualified beneficiary” and has independent election rights to COBRA continuation
coverage for 18 or 36 months. This means each covered individual can elect independently to continue plan coverage, even if the covered employee chooses not to
continue coverage. Each qualified beneficiary will have a maximum 60 days to elect COBRA continuation coverage. The 60-day election period is measured from the date
that the group coverage is lost due to the event or from the date of the COBRA qualifying event notification, whichever date is later. The COBRA election notice will
reflect the last date to elect continuation coverage.

Length of COBRA Coverage 18 Months

If the event causing the loss of coverage is a voluntary or involuntary termination of employment (other than for reasons of gross misconduct) or a reduction in hours (which causes loss of coverage), then each qualified beneficiary will have the opportunity to continue coverage for 18 months from the date of loss of coverage.

Extensions to the 18-Month COBRA Coverage Period

Social Security Disability – The 18 months of continuation coverage can be extended for an additional 11 months of coverage, to a maximum of 29 months, for all qualified beneficiaries if the Social Security Administration determines a qualified beneficiary was disabled according to Title II or XVI of the Social Security Act at any time during the first 60 days of continuation coverage. It is the qualified beneficiary’s responsibility to obtain this disability determination from the Social Security Administration and provide a copy of the determination to the plan within 60 days after the date of determination and before the original 18 months expire. It is also the qualified beneficiaries responsibility to notify the plan within 30 days if a final determination has been made that they are no longer disabled.

Secondary Events – Another extension to the 18-month continuation period can occur, if during the 18 months of continuation coverage, a second event takes place (divorce, termination of domestic partnership, legal separation, death, or a dependent child ceases to be a dependent (e.g., child turns age 26). If a second event occurs, then the original 18 months of continuation coverage can be extended to 36 months from the date of loss of coverage for eligible dependent qualified beneficiaries (for a spouse, domestic partner, or dependent child).

If a second event occurs, it is the qualified beneficiary’s responsibility to notify the plan in writing within 60 days of the second event and within the original 18-month COBRA timeline.

A reduction in hours followed by a voluntary or involuntary termination of employment is not considered a second COBRA event. In no event, however, will continuation coverage last beyond three years (36 months) from the original date of loss of coverage.

Special Medicare Entitlement Rule for Dependents Only
If an employee becomes entitled to Medicare benefits prior to the date of an 18-month qualifying event, then his/her dependents is eligible for 18 months of COBRA continuation coverage, or 36 months measured from the date of the Medicare entitlement, whichever is greater.

Example: If an employee becomes entitled to Medicare seven (7) months prior to termination of employment, then the dependents will be offered 29 months of continuation
coverage. The employee is only offered 18 months.

Length of COBRA Coverage 36 Months

If the event causing the loss of coverage is the death of the employee, divorce, termination of domestic partnership, legal separation, Medicare entitlement, or a child ceases to be a dependent (e.g., child turns age 26), then each qualified beneficiary will have the opportunity to continue coverage for 36 months from the date of loss of coverage.

COBRA Premiums

If COBRA is elected, the total cost for the insurance will be 100% of the total premium, plus a 2% administration fee. The premium is paid monthly by the enrollee to the plan or its designee. The plan or its designee is not required to send a monthly bill. Your department is not required to pay a share of the COBRA premium. If there is a change in future premium rates, then you will be notified prior to the new premiums going into effect.

Open Enrollment Period

If you elect COBRA, you will have rights to make allowable changes to your coverage during the annual open enrollment period. Specific instructions will be sent to you prior to the beginning of the open enrollment period.

COBRA in Retirement

If a former spouse, domestic partner, or dependent child of a retired State employee has a COBRA qualifying event, he/she will be offered continuation coverage through CalPERS. CalPERS retirees and their eligible dependents should contact CalPERS regarding COBRA notices and enrollment options.

Questions – If any covered individual has questions regarding this notice of your COBRA rights and responsibilities or you want to report a change in address, please contact the Personnel Office at (phone number, address, and name of department representative) for assistance. It is important to keep us informed of a change in address.