1 Health Benefits Under COBRA Consolidated Omnibus Budget Reconciliation Act of 1985 U.S. Department...

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Health Benefits Under Health Benefits Under COBRACOBRA

Consolidated Omnibus Consolidated Omnibus Budget Reconciliation Act Budget Reconciliation Act

of 1985of 1985

U.S. Department of LaborU.S. Department of LaborEmployee Benefits Security AdministrationEmployee Benefits Security Administration

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The LawThe Law

COBRA amended:COBRA amended:

ERISAERISA(Sections 601 – 608)(Sections 601 – 608)

Internal Revenue Code Internal Revenue Code (IRC § 4980B)(IRC § 4980B)

Public Health Service Act Public Health Service Act

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What is COBRA What is COBRA Continuation Coverage?Continuation Coverage?

It is continuation coverage that group It is continuation coverage that group health plans are required to offer to health plans are required to offer to qualified beneficiaries (i.e., employees, qualified beneficiaries (i.e., employees, spouses, dependents) when group spouses, dependents) when group health plan coverage would otherwise health plan coverage would otherwise be lost due to a qualifying event (such be lost due to a qualifying event (such as termination or reduction of hours of as termination or reduction of hours of employment, divorce, death of covered employment, divorce, death of covered employee, etc.). employee, etc.).

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Who is Entitled to Who is Entitled to COBRA?COBRA?

An individual will be entitled to COBRA An individual will be entitled to COBRA if 3 basic requirements are metif 3 basic requirements are met

1.1. Your group health plan is covered by Your group health plan is covered by COBRA (plan coverage)COBRA (plan coverage)

2.2. A qualifying event occurs (QE)A qualifying event occurs (QE)

3.3. They are a qualified beneficiary (QB)They are a qualified beneficiary (QB)

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Plans Covered by COBRAPlans Covered by COBRA

1.1. Is your health plan covered by Is your health plan covered by COBRA?COBRA?

Yes, if it is:Yes, if it is:

A group health plan;A group health plan;

Sponsored by a private sector employer; Sponsored by a private sector employer;

That employed at least 20 employees in That employed at least 20 employees in previous calendar yearprevious calendar year

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Plan CoveragePlan CoverageGroup Health PlanGroup Health Plan

An arrangement established or An arrangement established or maintained by an ER to provide EEs maintained by an ER to provide EEs or their families with medical care.or their families with medical care. ArrangementArrangement

Insurance Insurance HMOHMO From ER’s assetsFrom ER’s assets

Medical CareMedical Care Physician carePhysician care Hospital Care (inpatient and outpatient)Hospital Care (inpatient and outpatient) Surgery and other major medical benefitsSurgery and other major medical benefits Prescription drugsPrescription drugs Dental and vision careDental and vision care

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Plan CoveragePlan CoverageSponsored by an EmployerSponsored by an Employer

COBRA amended ERISA to cover group COBRA amended ERISA to cover group health plans sponsored by: health plans sponsored by:

Private-sector ERPrivate-sector ER Employee organizations (labor unions)*Employee organizations (labor unions)**Special rules may apply*Special rules may apply

Other laws may have similar provisions for Other laws may have similar provisions for group health plans sponsored by:group health plans sponsored by:

Federal governmentFederal government State or local governments State or local governments

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Plan CoveragePlan CoverageEmployed at Least 20 EEsEmployed at Least 20 EEs

20 Employees20 Employees Full-timeFull-time Part-timePart-time

More than 50% of its typical More than 50% of its typical business daysbusiness days

In the previous calendar yearIn the previous calendar year

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Qualifying EventsQualifying Events

What is a qualifying event?What is a qualifying event?

A qualifying event (QE) is an event A qualifying event (QE) is an event specified in COBRA where an individual specified in COBRA where an individual loses group health care coverage.loses group health care coverage.

The QE determines who the qualified The QE determines who the qualified beneficiaries (QBs) are for that event and beneficiaries (QBs) are for that event and the period of time that the plan must offer the period of time that the plan must offer continuation coverage. continuation coverage.

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Qualifying EventsQualifying Events

QEs for QEs for Covered EmployeesCovered Employees (if the event causes the covered EE to (if the event causes the covered EE to

lose coverage)lose coverage)

Voluntary or involuntary termination of Voluntary or involuntary termination of EE’s employment for any reason other EE’s employment for any reason other than “gross misconduct”than “gross misconduct”

Reduction of EE’s hours of employmentReduction of EE’s hours of employment

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Qualifying EventsQualifying Events QEs for QEs for SpouseSpouse and and Dependent ChildDependent Child of of

covered EE (if event causes the spouse or covered EE (if event causes the spouse or dependent child to lose coverage)dependent child to lose coverage) Termination of covered EE’s employment for any Termination of covered EE’s employment for any

reason other than “gross misconduct”reason other than “gross misconduct” Reduction in hours worked by covered EEReduction in hours worked by covered EE Covered EE becomes entitled to MedicareCovered EE becomes entitled to Medicare Divorce or legal separation of spouse from covered Divorce or legal separation of spouse from covered

EEEE Death of covered EEDeath of covered EE

In addition to above, a QE for a In addition to above, a QE for a Dependent Dependent ChildChild Loss of “dependent status” under the plan rulesLoss of “dependent status” under the plan rules

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Qualified BeneficiariesQualified Beneficiaries A QB is an individual who was covered by a A QB is an individual who was covered by a

group health plan on the day before the QE group health plan on the day before the QE occurred that caused loss of coverageoccurred that caused loss of coverage Covered EECovered EE Their spouse (or former spouse)Their spouse (or former spouse) Their dependentsTheir dependents

In certain cases involving Chapt. 11 In certain cases involving Chapt. 11 bankruptcy of the ER, QBs also may includebankruptcy of the ER, QBs also may include Covered retireeCovered retiree Their spouse (or former spouse)Their spouse (or former spouse) Their dependentsTheir dependents

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Qualified BeneficiariesQualified Beneficiaries

A QB can also beA QB can also be Any child born or placed for adoption Any child born or placed for adoption

with a covered employee during a with a covered employee during a period of continuation coverageperiod of continuation coverage

Agents, independent contractors, and Agents, independent contractors, and directors who participate in the group directors who participate in the group health planhealth plan

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Notices and Election Notices and Election ProceduresProcedures

Notice Procedures (cont.)Notice Procedures (cont.)

COBRA General Notice COBRA General Notice (Model Notice)(Model Notice)(from plan to QB w/in 90 days of coverage) (from plan to QB w/in 90 days of coverage)

Information included in General NoticeInformation included in General Notice Name of plan, and address and telephone Name of plan, and address and telephone

number of someone who can be contacted number of someone who can be contacted for more plan and COBRA informationfor more plan and COBRA information

Description of COBRA rightsDescription of COBRA rights Explanation of what a QB must do to notify Explanation of what a QB must do to notify

plan of a QE or disabilitiesplan of a QE or disabilities Explanation of the importance of keeping Explanation of the importance of keeping

the plan administrator informed of the plan administrator informed of addresses of the Ps and Bsaddresses of the Ps and Bs

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COBRA Qualifying Event NoticesCOBRA Qualifying Event Notices Employer (30 days)Employer (30 days)

Termination or reduction of hoursTermination or reduction of hours Death of covered EEDeath of covered EE Bankruptcy of ERBankruptcy of ER

Covered EE or other QB (60 days)Covered EE or other QB (60 days) DivorceDivorce Legal separationLegal separation Child’s loss of dependent status under the planChild’s loss of dependent status under the plan

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COBRA Election Notice COBRA Election Notice (Model Notice)(Model Notice)(must be provided to QBs w/in 14 days after (must be provided to QBs w/in 14 days after

plan administrator receives notice of QE)plan administrator receives notice of QE)

Information included in Election NoticeInformation included in Election Notice Name of plan, and address and telephone Name of plan, and address and telephone

number of someone who can be contacted number of someone who can be contacted for more plan and COBRA informationfor more plan and COBRA information

How to elect coverageHow to elect coverage What will happen if coverage is not electedWhat will happen if coverage is not elected What coverage is available, for how long, and What coverage is available, for how long, and

how it can extend for disability or second how it can extend for disability or second QEsQEs

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COBRA Notice of Unavailability of COBRA Notice of Unavailability of Continuation CoverageContinuation Coverage From plan denying COBRA coverageFrom plan denying COBRA coverage

COBRA Notice of Early Termination of COBRA Notice of Early Termination of Continuation CoverageContinuation Coverage From plan describing why it is ending COBRA From plan describing why it is ending COBRA

benefits earlybenefits early

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Election ProceduresElection Procedures

Each QB has 60 days to elect COBRA from Each QB has 60 days to elect COBRA from the later of:the later of: Date coverage is actually lost; orDate coverage is actually lost; or Date QB furnished an Election NoticeDate QB furnished an Election Notice

Each QB can elect independently to elect Each QB can elect independently to elect COBRACOBRA

A QB can waive COBRA and later revoke the A QB can waive COBRA and later revoke the waiver as long as it is done before the end of waiver as long as it is done before the end of the election periodthe election period

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Duration of Continuation Coverage

* * In certain circumstances, QBs entitled to 18 months of continuation coverage may become entitled to a disability extension of an additional 11 months (for a total maximum of 29 months) or an extension of an additional 18 months due to the occurrence of a second QE (for a total maximum of 36 months).

Qualifying EventQualifying Event BeneficiaryBeneficiary CoverageCoverage TerminationTermination

Reduction of hoursReduction of hoursEmployeeEmployeeSpouseSpouseDependent ChildDependent Child

18 months*18 months*

Employee entitled to Employee entitled to MedicareMedicare

SpouseSpouseDependent childDependent child

36 months36 months

Divorce or legal separationDivorce or legal separation Death of covered employeeDeath of covered employee Loss of “dependent child” Loss of “dependent child”

statusstatusDependent childDependent child 36 months36 months

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Extension of COBRA Extension of COBRA CoverageCoverage

Disability (additional 11 months) Disability (additional 11 months) ((covered EE, spouse, or dependent child)covered EE, spouse, or dependent child)

Disability would have to have stated at sometime before Disability would have to have stated at sometime before the 60th day of COBRA coveragethe 60th day of COBRA coverage

Disability must last at least until the end of the 18-Disability must last at least until the end of the 18-month period of COBRA coveragemonth period of COBRA coverage

The disabled QB notifies plan of disability determination The disabled QB notifies plan of disability determination w/in 60 days after the later of:w/in 60 days after the later of:

Date SSA issues disability determinationDate SSA issues disability determination Date QE occursDate QE occurs Date QB loses (or would lose) coverage due to the QEDate QB loses (or would lose) coverage due to the QE Date QB receives the COBRA General NoticeDate QB receives the COBRA General Notice

Total up to 29 monthsTotal up to 29 months

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Extension of COBRA Extension of COBRA CoverageCoverage

(cont.)(cont.) Second Qualifying Event (additional 18 Second Qualifying Event (additional 18

months)months)

(spouse or dependent child)(spouse or dependent child)

Death of Covered EEDeath of Covered EE Divorce or legal separation of a covered EE and Divorce or legal separation of a covered EE and

spousespouse Loss of dependent child status under the planLoss of dependent child status under the plan Covered EE becomes entitled to MedicareCovered EE becomes entitled to Medicare

Total up to 36 monthsTotal up to 36 months

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Early Termination of Early Termination of COBRACOBRA

The group health plan may terminate COBRA The group health plan may terminate COBRA early if:early if:

Premiums not paid in full on a timely basisPremiums not paid in full on a timely basis The ER ceases to maintain any group health planThe ER ceases to maintain any group health plan A QB begins coverage under another plan, as long A QB begins coverage under another plan, as long

as the new plan does not impose an exclusion or as the new plan does not impose an exclusion or preexisting condition on the QBpreexisting condition on the QB

A QB becomes entitled to Medicare after electing A QB becomes entitled to Medicare after electing COBRACOBRA

A QB engages in certain types of conduct (such as A QB engages in certain types of conduct (such as fraud)fraud)

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Benefits Under COBRABenefits Under COBRA

A QB is entitled to the same benefits as a A QB is entitled to the same benefits as a similarly situated active EEsimilarly situated active EE Benefits, choices, and servicesBenefits, choices, and services

A QB is subject to the same rules and limits A QB is subject to the same rules and limits Co-payments, deductibles, and coverage limitsCo-payments, deductibles, and coverage limits

A QB must comply with rules of the plan A QB must comply with rules of the plan Filing benefit claims and following the appeals Filing benefit claims and following the appeals

processprocess

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Who Pays For COBRA?Who Pays For COBRA? Plan limited to charging 102% of Plan limited to charging 102% of

premiums (for disability extension - premiums (for disability extension - 150%)150%)

Plan must allow QBs at least 45 days Plan must allow QBs at least 45 days from COBRA election to make initial from COBRA election to make initial premium payment. premium payment.

Must give a minimum 30-day grace Must give a minimum 30-day grace period for payment of any premiumperiod for payment of any premium

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Alternatives to COBRAAlternatives to COBRA

When losing group health coverage, an When losing group health coverage, an individual should consider all the options:individual should consider all the options:

““Special Enrollment” in another group Special Enrollment” in another group health plan (spouse’s)health plan (spouse’s)

COBRACOBRA

An individual health insurance policyAn individual health insurance policy

State sponsored programsState sponsored programs

Affordable Care ActAffordable Care Act

Title I: Quality, Affordable Health Care for All Title I: Quality, Affordable Health Care for All AmericansAmericans

Market ReformsMarket Reforms

Coverage of All Americans Coverage of All Americans Tax Credits to Ensure AffordabilityTax Credits to Ensure Affordability


Coverage of All AmericansCoverage of All Americans Shared ResponsibilityShared Responsibility

Individuals must maintain “minimum essential coverage” Individuals must maintain “minimum essential coverage” or pay a penalty (with some exceptions).or pay a penalty (with some exceptions).


Shared Responsibility Cont.Shared Responsibility Cont.

Employer Shared Responsibility – Final RegulationsEmployer Shared Responsibility – Final Regulations

February 10, 2014February 10, 2014

For more information:For more information:http://www.irs.gov/uac/Newsroom/Employer-Shared-Responsibility


Coverage of All AmericansCoverage of All Americans The Marketplace – “Exchanges” (State/Federal)The Marketplace – “Exchanges” (State/Federal)

Established to help individuals and small employers to gain Established to help individuals and small employers to gain access to coverage.access to coverage.

Qualified health plans at four different levels (platinum, gold, Qualified health plans at four different levels (platinum, gold, silver, and bronze).silver, and bronze).

One single, streamlined application and standard presentation One single, streamlined application and standard presentation

of information.of information.


Tax Credits to Ensure AffordabilityTax Credits to Ensure Affordability New, refundable tax credits for certain AmericansNew, refundable tax credits for certain Americans

New tax credits for certain small businessesNew tax credits for certain small businesses

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Questions?Questions?

1 Health Benefits Under COBRA Consolidated Omnibus Budget Reconciliation Act of 1985 U.S. Department...

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