What is COBRA

Insurance coverageWhat is COBRA?

  • It is the Consolidated Omnibus Budget Reconciliation Act of 1985
  • COBRA is a law passed by the U.S. Congress in 1986 that mandates an insurance program to give eligible employees the opportunity to continue health insurance coverage after experiencing the loss of active coverage

What Employers are Subject to COBRA?

  • Almost all group health plans are subject to COBRA
  • Some small employer plans are not subject to COBRA
    • If a small employer has less than 20 employees employed on a typical business day during the previouscalendar year, then the group is exempt from COBRA the following year
    • If an employer has employed fewer than 20 employees on at least 50% of its typical business days during that year, then the group is exempt from COBRA the following year
  • If you have any questions regarding the group’s eligibility for COBRA, please contact legal counsel

What Plans are Subject to COBRA?

  • COBRA applies to group health plans that provide health care and are maintained by the employer
  • Group health plans may include:
    • Medical
    • Dental
    • Vision
    • Flexible Spending Account
    • Health Care Reimbursement Arrangement
    • Employee Assistance Program
  • Note: Health Savings Accounts are not subject to COBRA

What Qualifying Events Trigger the Obligation to Offer COBRA Coverage?

Qualifying Events trigger COBRA if they cause a loss of coverage. These possible events are:

  • Termination of a covered employee’s employment
  • A reduction of a covered employee’s hours of employment
  • The death of a covered employee
  • A divorce or legal separation from the covered employee
  • Ceasing to be a dependent child under the requirements of the plan
  • The covered employee becoming entitled to Medicare
  • Employer bankruptcy (this applies to retiree plans only)
  • Note: Not all events cause a loss of coverage
    • Coverage dropped during open enrollment is not a COBRA qualifying event

What is a Loss of Plan Coverage?

The general definition means to cease to be covered under the same terms and conditions as in effect immediately before the qualifying event

  • A loss of coverage includes:
    • Loss of group health coverage
    • An increase in required premiums
    • A reduction of benefits
    • Any other change in terms or conditions of coverage

How Long can COBRA last?

  • The maximum coverage period for a termination of employment or reduction of hours is 18 months
  • Other qualifying events (if a loss of coverage occurs) that extend the maximum period to 36 months for dependents include:
    • Death of employee
    • Divorce or legal separation
    • Child’s loss of dependent status
    • Employee’s entitlement to Medicare
  • If the employee is certified by the Social Security Administration to be disabled within the first 60 days of COBRA coverage, the maximum coverage period may be extended to 29 months if the participant notifies TPA within that first 60 days

Loss of Coverage/Election Notice Procedure

  • Employer has 30 days after the COBRA qualifying event to notify TPA. TPA has 14 days to mail a COBRA Election Notice to the Qualified Beneficiary
  • Complete a Termination Template for your respective Qualified Beneficiaries
    • Instructions are included on the ‘Instruction’ tab of the spreadsheet
  • Upload the Termination Template via TPAs secure File Transfer utility
  • TPA will mail a COBRA Election Notice to the Qualified Beneficiary
  • If Qualified Beneficiary elects COBRA coverage, TPA will reinstate coverage with the carrier(s) upon receipt of initial premium payment
  • Payments collected from COBRA Participants will be forwarded to the employer to pay for the insurance premiums
  • TPA will notify the carrier(s) when Participant terminates from COBRA coverage.

Procedure for Qualified Beneficiaries & COBRA Participants

  • Qualified Beneficiary will receive a COBRA Election Notice
  • Qualified Beneficiary elects COBRA by returning completed election form to TPA within 60 days from the date the Election Notice was postmarked or the loss of coverage date, whichever is later
  • TPA will mail courtesy payment coupons to the participant
  • Participant has an initial 45 days grace period, to pay premium/s
    • After initial 45 days grace period, premium due dates revert to the standard cycle with the due date on the first of the month of coverage and a 30 days grace period
    • Checks, money orders and/or online payments are accepted
    • Payment is mailed to: TPA
    • Detailed payment instructions are included with the payment coupons
  • Once participant remits initial payment, TPA will reinstate coverage with the insurance carrier(s)
  • If payment is not received within the grace period, carrier(s) will be notified to terminate COBRA coverage

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