4 COBRA Conundrums Answered
- Marriage & Divorce for COBRA Beneficiaries.
Let’s say your former employee, who is enrolled into COBRA continuation coverage, gets married a month or two into her initial 18 months of COBRA, and adds her new spouse to the coverage, but then later down the line while they are still covered on COBRA coverage, they get divorced. Will the spouse now be entitled to 36 months of COBRA?
In the above scenario, the spouse will not be eligible to extend COBRA. “After-acquired” spouses have no additional COBRA rights such as extended coverage because under COBRA, one of the criteria which must be met in order to be considered a second COBRA qualifying event, is that the individual involved must have been connected to the first (original) qualifying event. Generally, individuals added to a COBRA plan after the original qualifying event are not qualified beneficiaries and do not have continued coverage rights under COBRA. The exception being children who are born to, or placed for adoption with, and are added to an existing COBRA plan and they experience a second qualifying event.
So what is a second qualifying event and who is eligible to extend COBRA coverage? Check out this definition, and criteria which must be met below:
Coverage extended from 18 to 36-Month Period Under COBRA. A spouse and dependent children who already have COBRA coverage, and then experience a second qualifying event, may be entitled to a total of 36 months of COBRA coverage. Second qualifying events may include the death of the covered employee, divorce or legal separation from the covered employee, the covered employee becomes entitled to Medicare benefits (under Part A, Part B or both), or a dependent child ceases to be eligible for coverage as a dependent under the group health plan. The five conditions below must be met in order for a second event to extend a period of coverage:
1. The initial COBRA qualifying event is the covered employee’s termination or reduction of work hours, which results in an 18-month period of continuation coverage;
2. The second event that leads to a 36-month maximum period of coverage occurs during the first 18-month period of continuation coverage (or within the 29-month coverage period if SSA-disability extension applies);
3. The second event would have caused a qualified beneficiary to lose coverage under the plan in the absence of the first qualifying event;
4. The individual was a qualified beneficiary in connection with the first qualifying event and is still a qualified beneficiary at the time of the second event; and
5. The individual has met any applicable COBRA notification requirement in connection with a second event (i.e. notifying the plan administrator of a divorce or a child ceasing to be a dependent under the plan within 60 days after the event).
If all of these conditions associated with a second qualifying event are met, then the COBRA continuation coverage period for the affected qualified beneficiary (or beneficiaries) is extended from 18 months (or 29 months) to 36 months.
- Dependent Children When An Employee Passes Away. If an Employee who is enrolled in Single + Children coverage passes away, do the children get offered individual coverage each, or can the oldest child be the primary policy holder and be offered Single + Children coverage for themselves and their siblings?
In this case, the plan rules would take precedent and how COBRA is offered to the surviving dependents would ultimately be determined by what the plan will allow. Often times the age of the eldest child and/or legal guardianship can play a role in the carrier’s guidelines in this situation. If faced with this scenario, the employer should contact their plan’s Benefit Counsel to determine how they should offer COBRA before sending any notices.
- Change in Employee’s Status. An Employee goes from full-time to part-time and loses coverage due to a reduction of hours, and he elects COBRA. In the eighth month of the employee’s COBRA, his employment is termed. Does this constitute as a second qualifying event, allowing a new 18 months of COBRA eligibility to start from the termination date?
Remember, COBRA is offered when there is a loss of coverage on an employer’s group plan. If the employee had a loss of coverage already due to going part-time and elected COBRA, then the subsequent termination of employment did not trigger any loss of coverage. In this scenario, the beginning of the participant’s 18 months of COBRA would not change from the original reduction of hours qualifying event.
See above definitions for second COBRA qualifying events. Side Note: Under COBRA/ERISA, there is no scenario that exists where a qualified beneficiary can have more than 36 months of COBRA from the original qualifying event. 36-months is the maximum period of coverage under COBRA.
- Offering Different Health Plans to Qualified Beneficiaries. Typically, only the health plans (medical, dental, vision, etc) that the Qualified Beneficiaries were enrolled in at the time of qualifying event can be offered to them under COBRA. Are there any exceptions to that?
Yes, if a Qualified Beneficiary covered by an HMO, moves out of the HMO’s service area to another area where the employer has employees covered under a different plan, then the QB must be given the opportunity to enroll in the plan that provides coverage where the QB is re-locating. Apart from that exception, the only other time a COBRA participant can change coverage options is during Open Enrollment.* That being said, if an QB’s COBRA qualifying event is concurrent with the group plan’s renewal, they could elect a new plan via open enrollment while simultaneously electing COBRA.
*Bear in mind that some plans, such as self-funded plans make their own special rules pertaining to these types of scenarios, and may determine that all employees are to be offered multiple coverage options at the time of a COBRA qualifying event. While this is rare, the important thing here is that Employers are consistent, ethical, and follow the rules set forth in the Group Health Plan provisions.
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