COBRA Compliance

When an employee loses their insurance coverage due to termination or other specific events, when are you required to offer COBRA and which benefit plans are subject to COBRA coverage?

COBRA Fundamentals

• COBRA stands for Consolidated Omnibus Budget Reconciliation Act
• Employers must provide the following COBRA information to covered employees and dependents within the first 90 days of becoming a participant in the plan: general notice of COBRA rights and the plan’s Summary Plan Description (SPD) must also provide COBRA information
• Employers must provide an election notice to employees and dependents when they lose coverage due to a qualifying event
  • Qualifying events include:
    • Reduction in hours worked
    • Termination of employment
    • Divorce
    • Legal separation
    • Child is no longer an eligible dependent
    • Employee becomes eligible for Medicare
    • Death of the covered employee
  • Coverage is offered for a temporary period of time
• Employees and dependents are eligible to receive the same coverage they had the day before the qualifying event occurred
• The employee usually pays for premiums – up to 102% of the cost of the plan
• COBRA applies to public school districts, counties, municipalities, private sector organizations, and employers with 20 or more employees
• COBRA does NOT apply to small employer group health plans (fewer than 20 employees) and churches
• COBRA is regulated by the federal government however many states have their own COBRA rules as well

Notice Requirements

• Employers must notify the plan administrator of a qualifying event within 30 days after any employee’s death, termination, reduced hours, or Medicare entitlement.
• Employees/dependents must notify the plan administrator of a qualifying event within 60 days after divorce, legal separation or a child losing dependent status.
• The plan administrator must provide election notice to employee/dependents within 14 days of receiving notification of qualifying event
• Beneficiaries must respond to the notice and elect COBRA coverage by the 60^th day after written notice has been sent or the day health care coverage ceased, whichever is later. If they do not respond by then, they will lose all rights to COBRA benefits.

What health plans are subject to COBRA?

Health plans are subject to COBRA if (1.) they provide medical care and (2.) are maintained by an employer. Medical care is defined as services related to the maintenance of health, prevention of illness, and treatment of illness or injury.¹ Medical care includes coverages such as medical, dental, and vision coverage. See the chart below for additional health plans applicable to COBRA.

Download this COBRA bulletin to learn more.

¹Mosby's Medical Dictionary, 8th edition. S.v. "medical care." Retrieved December 20 2017 from https://medical-dictionary.thefreedictionary.com/medical+care

²Yes, FSAs are subject to COBRA but most will qualify for a special exception

³Wellness plans that provide medical care are likely subject to COBRA

⁴No, as long as they don’t provide medical care