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In the March 29 blog, I introduced COBRA, with a general guide to determine which employers are subject to federally mandated continuation coverage – generally, private sector employers sponsoring group health plans that have 20 or more employees on more than half of the business days in the previous calendar year. In this edition, I will discuss the who, when, and how long of COBRA – who is eligible, when is that person entitled to coverage, and how long the federally-mandated continuation coverage lasts.
Who is eligible for COBRA?
Group health plans subject to COBRA must offer continuation coverage to “qualified beneficiaries.” To be a qualified beneficiary, the individual must have been covered under the group health plan the day before the qualifying event and must be a covered employee, a covered spouse of the employee, a covered dependent of the employee, or a child born to or placed for adoption with a covered employee during a period of COBRA continuation coverage.
A qualified beneficiary might also be a covered employee who had retired on or before the date of substantial elimination of group health plan coverage due to the bankruptcy of the employer. Any spouse, surviving spouse, or dependent child of such a covered employee is also a qualified beneficiary if, on the day before the bankruptcy qualifying event, the spouse, surviving spouse, or dependent child is a beneficiary under the plan.
Let’s take a closer look at a couple of the common COBRA missteps.
A covered employee might not be an employee.
A “covered employee” is a defined term and means an individual who is (or was) provided coverage under a group health plan by virtue of the performance of services by the individual for one or more persons maintaining the plan. Therefore, agents, independent contractors, and directors who participate in the group health plan may be covered employees.
Be careful of domestic partner coverage.
Although plans may allow for domestic partner eligibility, COBRA is available to a “covered spouse of the employee.” Because domestic partners are not “spouses,” they are not qualified beneficiaries.
What does “placed for adoption” mean?
A child that is born to, adopted by, or placed for adoption with a covered employee during the covered employee’s COBRA continuation period becomes a qualified beneficiary when enrolled in the benefit. “Placement for adoption or being placed for adoption” means that the covered employee has assumed a legal obligation for total or partial support of a child in anticipation of the adoption of the child. The child’s placement for adoption with the covered employee terminates upon the termination of the legal obligation for total or partial support.
In contrast, if a covered employee who is a qualified beneficiary does not elect COBRA continuation coverage during the election period, then any child born to or placed for adoption with the former qualified beneficiary (covered employee) on or after the date of the qualifying event is not a qualified beneficiary.
Qualified beneficiaries can forfeit their status.
A qualified beneficiary who does not elect COBRA continuation coverage in connection with a qualifying event ceases to be a qualified beneficiary when the election period ends. This lost right generally cannot be resurrected.
When is the individual entitled to coverage?
Only certain events, called “qualifying events,” trigger an entitlement to continuation coverage. The qualifying events and the respective qualified beneficiaries affected are:
How long does the continuation coverage last?
Generally, the maximum continuation coverage period is determined by the qualifying event and is measured from the qualifying event date.
If the qualifying event is loss of coverage due to a covered employee’s reduction in hours or termination of employment other than by reason of gross misconduct, the maximum coverage period for all qualified beneficiaries is 18 months.
The maximum coverage period is 36 months for a spouse and dependent children who are qualified beneficiaries when the qualifying event is the death of a covered employee, the divorce or legal separation of a covered employee from the employee’s spouse, or the covered employee’s becoming entitled to Medicare benefits.
There may be times when the 18-month maximum continuation coverage due to the employee’s reduction in hours or termination of employment is extended.
When the qualifying event is the bankruptcy of the employer, the coverage period for the retired covered employee ends on the date of the retired covered employee’s death. The maximum coverage period for a qualified beneficiary who is the spouse, surviving spouse, or dependent child of the retired covered employee is 36 months from the death of the retired covered employee.
It is extremely important that employers have procedures in place to examine potential COBRA situations. Regardless of whether the employer contracts COBRA administration to a third party, the plan sponsor/employer is the liable party. Employers should have processes in place for identifying which individuals are entitled to coverage when coverage terminates, and ensuring proper identification of potential qualified beneficiaries. Failure to properly identify COBRA qualified beneficiaries can be very expensive. In the next segment, we will look at the notice requirements and potential liabilities for employers.
For an in-depth look at qualifying events that trigger COBRA, the ACA impact on COBRA, measurement and look-back issues, health FSA carryovers, and reporting on the coverage offered, request UBA’s ACA Advisor, “COBRA and the Affordable Care Act”.
Originally published by United Benefit Advisors – Read More
POSTED BY ADMIN ON MAY 3, 2016 IN ACA, COBRA, COMPLIANCE NEWS, HR BENEFIT ADVISORS BLOG, THE BLOG | COMMENTS OFF ON GET THE FACTS ON COBRA COVERAGE – WHO, WHEN AND HOW LONG?
As we mentioned in the first edition of this mini-serieson the Federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), “marketplaces” or “exchanges” created by the Patient Protection and Affordable Care Act (ACA) did not make COBRA obsolete. Rather, COBRA is still going strong. And while the general rule of COBRA is not necessarily that difficult to understand, the timeframes, notice requirements, intricacies, and the ways in which COBRA interacts with other laws presents employers with potentially extremely expensive outcomes.