COBRA gives workers who lose their health benefits as well as their spouse, former spouse and dependent children the ability to continue the coverage provided by their employer for a certain period of time following life changes called qualifying events. These include:. While you may offer other benefits to employees like life insurance, COBRA only covers plans for medical care, including dental and vision care. The state continuation laws vary in their eligibility rules and coverage terms.
Even if you have more than 20 employees, you may also be subject to these state laws on top of COBRA, like in Connecticut, where the state continuation law applies to all group plans, including those regulated by COBRA. In fact, you can require your former employees or their dependents to pay the entire premium. Plans also must give 45 days after an individual elects coverage before requiring them to pay a premium. Because of the higher costs of COBRA coverage, not all employees will opt to continue their group benefits.
If you have to offer COBRA coverage, there are five steps you need to follow to be in compliance with the law:. These are provided by the health plan administrator, which may be you.
One is the qualifying event notice, which requires notifying the health plan when an employee is eligible for COBRA. Otherwise, for example, in the case of divorce, it is up to the employee or qualified beneficiary to notify the plan. After learning of a qualifying event, your health plan has 14 days to give beneficiaries an election notice that explains how they opt in to coverage. COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal law that gives employees the option to continue health insurance coverage after ending employment.
The majority of Americans have private health insurance; more than 56 percent receive health insurance through their employer, according to the U.
Census Bureau PDF. This percentage is much higher here in Hawaii, due to the Hawaii Prepaid Health Care Law , which requires employers to offer health insurance to employees who work more than 20 hours per week. Under COBRA, employees and their dependents have a right to temporarily continue health insurance coverage when group health coverage would otherwise be lost due to certain qualifying events.
These events include:. The type of qualifying event will determine who the qualified beneficiaries are and the period of time that continuation coverage must be offered.
Generally speaking, COBRA applies to all group health plans maintained by private-sector employers with 20 or more employees. If you employed 20 or more employees in at least 50 percent of typical business days in the prior calendar year, you are required to offer temporary continuation of benefits under COBRA. Both full- and part-time employees are counted. Under ERISA, group health plans must be administered by a plan administrator, who is usually named in the plan documents.
Many group health plans are administered by the employer that sponsors the plan, but group health plans are also frequently administered, in whole or in part, by another individual or organization separate from the employer, such as a professional benefits administration firm.
COBRA requires group health plans to offer continuation coverage to covered employees, former employees, spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain specific events. COBRA sets rules for how and when continuation coverage must be offered and provided, how employees and their families may elect continuation coverage, and what circumstances justify terminating continuation coverage.
The premium that is charged cannot exceed the full cost of the coverage, plus a 2 percent administration charge. Under the Health Insurance Portability and Accountability Act HIPAA , upon certain events, group health plan and health insurance issuers are required to provide a special enrollment period during which individuals who previously declined coverage for themselves and their dependents, and who are otherwise eligible, may be allowed to enroll without having to wait until the next open season for enrollment.
One event that triggers special enrollment is an employee or dependent of an employee losing eligibility for other health coverage. The employee or dependent must request special enrollment within 30 days of the loss of other coverage. If an employee or dependent chooses to elect COBRA instead of special enrollment upon a loss of group health coverage, the employee or dependent will have another opportunity to request special enrollment once COBRA has been exhausted.
In addition, individuals in a family may be eligible for health insurance coverage through various state programs. For more information, contact your state department of insurance. A group health plan is required to offer COBRA continuation coverage only to qualified beneficiaries and only after a qualifying event has occurred. In addition, any child born to or placed for adoption with a covered employee during a period of continuation coverage is automatically considered a qualified beneficiary.
Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries. The type of qualifying event determines who the qualified beneficiaries are for that event and the period of time that a plan must offer continuation coverage. COBRA establishes only the minimum requirements for continuation coverage. A plan may always choose to provide longer periods of continuation coverage. The following are qualifying events for a covered employee if they cause the covered employee to lose coverage:.
The following are qualifying events for a spouse and dependent child of a covered employee if they cause the spouse or dependent child to lose coverage:. In addition to the above, the following is a qualifying event for a dependent child of a covered employee if it causes the child to lose coverage:. They must also have rules for how COBRA continuation coverage is offered, how qualified beneficiaries may elect continuation coverage, and when it can be terminated. Notice Procedures. The SPD is a written document that gives important information about the plan, including what benefits are available under the plan, the rights of participants and beneficiaries under the plan, and how the plan works.
ERISA requires group health plans to give each participant an SPD within 90 days after he or she first becomes a participant in a plan or within days after the plan is first subject to the reporting and disclosure provisions of ERISA. In addition, if there are material changes to the plan, the plan must give participants a summary of material modifications SMM not later than days after the end of the plan year in which the changes become effective.
If the change is a material reduction in covered services or benefits, the SMM must be furnished not later than 60 days after the reduction is adopted. A participant or beneficiary covered under the plan may request a copy of the SPD and any SMMs as well as any other plan documents , which must be provided within 30 days of a written request.
Group health plans must give each employee and each spouse of an employee who becomes covered under the plan a general notice describing COBRA rights.
The general notice must be provided within the first 90 days of coverage. The Department of Labor has developed a model general notice that single-employer group health plans may use to satisfy the general notice requirement. In order to use this model general notice properly, the plan administrator must complete it by filling in the blanks with the appropriate plan information. Use of the model general notice, appropriately completed, will be considered by the Department to be good faith compliance with the general notice content requirements of COBRA.
Before a group health plan must offer continuation coverage, a qualifying event must occur. The group health plan is not required to act until it receives an appropriate notice of such a qualifying event. The covered employee or one of the qualified beneficiaries is responsible for notifying the plan if the qualifying event is:.
Group health plans are required to have procedures for how the covered employee or one of the qualified beneficiaries can provide notice of these types of qualifying events. The plan can set a time limit for providing this notice, but the time limit cannot be shorter than 60 days, starting from the latest of: 1 the date on which the qualifying event occurs; 2 the date on which the qualified beneficiary loses or would lose coverage under the plan as a result of the qualifying event; or 3 the date on which the qualified beneficiary is informed, through the furnishing of either the SPD or the COBRA general notice, of the responsibility to notify the plan and the procedures for doing so.
The procedures must describe how, and to whom, notice should be given, and what information must be included in the qualifying event notice. If one person gives notice of a qualifying event, the notice covers all qualified beneficiaries affected by that event. Under this law, group health plans include medical, prescription drug, dental and vision plans. However, a small employer exemption that applies if all employers maintaining the group health plan normally employed fewer than 20 employees on a typical business day in the preceding calendar year.
Extensions of the 18 month coverage period are available in certain circumstances, such as a disability, death, divorce of the covered employee, or a child ceasing to be a dependent under the terms of the plan. In addition, an assistance eligible individual include a person who, as of April 1, , falls within one of the categories described below:. The law requires that individuals receiving free COBRA coverage notify the group health plan of their eligibility for other group health plan or Medicare.
Individuals who fail to do so may be subject to a tax penalty. In either situation, the individual will be an assistance eligible individual only if the maximum COBRA coverage period that would have been available to that person extends past April 1, However, it also appears that if an extension of the general 18 month COBRA coverage period was provided or would have been available to an individual because of the occurrence of an intervening COBRA qualifying event e.
If any of the foregoing rules apply, the offer of extended COBRA coverage must be made available with an effective date of April 1, See discussion of notices below. If an individual elects to be enrolled pursuant to a special enrollment right, COBRA coverage must be offered until the end of what would have been the normal expiration date for the underlying COBRA coverage period e.
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