The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows certain individuals covered under a group health plan to continue that coverage in certain circumstances when it would otherwise cease. A COBRA election is required for a covered individual when there is a triggering event that causes (or will cause) a loss of coverage.
The COBRA triggering events include the following (if they result in a loss of health coverage):
- Termination of the covered employee’s employment for reasons other than gross misconduct;
- Reduction of hours of the covered employee’s employment;
- Divorce or legal separation of the covered employee from the employee’s spouse;
- Death of the covered employee
- A dependent child ceases to be a dependent under the terms of the plan;
- A covered employee becomes entitled to benefits under Medicare; or
- An employer’s bankruptcy (but only for retirees and their families).
Employers should be aware of the maximum coverage periods for COBRA are as follows:
- 18 months for
- Termination of employment
- Reduction in hours
- 36 months for
- Death of covered employee
- Divorce or separation
- Medicare entitlement
- Dependent child ceasing to be a dependent.
- Bankruptcy
Special Rules
There are special rules for newborn or adopted children. A child who is born to or placed for adoption with a covered employee during a period of COBRA coverage is a qualified beneficiary. The maximum COBRA coverage period for the child would be the remainder of the maximum coverage period for the continuant’s qualifying event.
There are also special timing rules for health flexible spending account plans. COBRA coverage for health FSAs may be terminated at the end of the plan year in which the qualifying event occurs.
Extension of Coverage Period
The maximum coverage period may be extended from 18 months in certain limited situations if the initial qualifying event is the termination of employment or reduction in hours.
- If a continuant is disabled within the first 18 months of COBRA coverage and the continuant provides a determination from the Social Security Administration in a timely manner, coverage may be extended from 18 to 29 months.
- If a second qualifying event occurs during the 18 (or 29) month period, and that second event has a 36-month COBRA period, coverage may be extended to 36 months for the spouse and dependent children.
Employers subject to the COBRA rules should be aware of the various timing rules under COBRA.
