Our deep dive into the Consolidated Omnibus Budget Reconciliation Act (COBRA) continues today. In Part 1, we detailed who’s covered by COBRA and. Then, Part 2 saw us investigate every notice requirement applicable under COBRA. Next, in Part 3, we’ll what benefits COBRA requires your plan provides and the ins and outs of the duration of continuation coverage.
COBRA also sets standards for the continuation coverage that plans must provide. The continuation coverage must be identical to the coverage currently available under the plan to similarly situated individuals who aren’t receiving continuation coverage. (Generally, this coverage is the same coverage the qualified beneficiary had immediately before the qualifying event.)
A qualified beneficiary receiving continuation coverage must receive the same benefits, choices, and services that a similarly situated participant or beneficiary currently receives under the plan. The qualified beneficiary is also subject to the same plan rules and limits that would apply to a similarly situated participant or beneficiaries, such as co-payment requirements, deductibles, and coverage limits. The plan’s rules for filing benefit claims and appealing any claims denials also apply.
Any changes made to a plan’s terms that apply to similarly situated active employees and their families will also apply to qualified beneficiaries receiving COBRA continuation coverage. If a child is born to or adopted by a covered employee during a period of coverage, the child is automatically considered to be a qualified beneficiary receiving continuation coverage. Thus, the plan must allow the child to be added to the continuation coverage.
Duration of Continuation Coverage
COBRA requires continuation coverage extends from the date of the qualifying event for a limited period of 18 or 36 months. The length of time for which continuation coverage must be made available (the “maximum period” of continuation coverage) depends on the type of qualifying event. Still, a plan may provide extended periods of coverage beyond the maximum period required by law.
When the qualifying event is the covered employee’s termination of employment (for reasons other than gross misconduct), or reduction in work hours, qualified beneficiaries must be eligible for 18 months of continuation coverage.
When the qualifying is the end of employment or reduction of the employee’s hours, and the employee became entitled to Medicare less than 18 months before the qualifying event, COBRA coverage for the employee’s spouse and dependents must be available for up to 36 months after the date the employee becomes entitled to Medicare.
So, for example, if a covered employee becomes entitled to Medicare 8 months before the date their employment ends (termination of employment is the COBRA qualifying event), COBRA coverage for their spouse and children must be available for up to 28 months (36 months minus 8 months). For all qualifying event, qualified beneficiaries must receive 36 months of continuation coverage.
A group health plan may terminate continuation coverage earlier than the end of the maximum period for any of the following reasons:
- Premiums aren’t paid in full on a timely basis
- The employer ceases to maintain any group health plan
- A qualified beneficiary begins coverage under another group health plan after electing continuation coverage
- A qualified beneficiary becomes entitled to Medicare benefits after electing continuation coverage
- A qualified beneficiary engages in fraud or other conduct that would justify terminating coverage of a similarly situated participant or beneficiary not receiving continuation coverage
If continuation coverage is terminated early, the plan must provide the qualified beneficiary with an early termination notice.
Extension of an 18-month Period
There are two circumstances under which individuals entitled to an 18-month maximum period of continuation coverage can become entitled to an extension of that maximum:
- When one of the qualified beneficiaries is disabled, or
- When a second qualifying event occurs.
If one of the qualified beneficiaries in a family is disabled and meets specific requirements, all the qualified beneficiaries in that family are entitled to an 11-month extension of the maximum period of continuation coverage (for a total maximum period of 29 months of continuation coverage). The plan can charge qualified beneficiaries an increased premium, up to 150 percent of the cost of coverage, during the 11-month disability extension.
Requirements for this extension are as follows:
- The Social Security Administration determines the qualified beneficiary is disabled before the 60th day of continuation coverage
- The disability continues during the rest of the initial 18-month period of continuation coverage
Disabled qualified beneficiaries (or another person on his or her behalf) also must notify the plan of the SSA determination. The plan can set a time limit for providing this notice of disability, but the time limit cannot be shorter than 60 days, starting from the latest of:
- The date SSA issues the disability determination
- When the qualifying event occurs
- The date the qualified beneficiary loses (or would lose) coverage under the plan as a result of the qualifying event, or
- When the qualified beneficiary is informed, through the furnishing of either the SPD or COBRA general notice, of the responsibility to notify the plan and the procedures for doing so.
The right to a disability extension may be terminated if the SSA determines the qualified beneficiary is no longer disabled. A plan can require disabled qualified beneficiaries to provide notice when such a determination is made. The plan must give the qualified beneficiaries at least 30 days after the SSA determination to provide such notice. Include this information in the plan’s SPD (and in the election notice if an offer of an 18-month period of coverage).
Second Qualifying Event
An 18-month extension may be available to qualified beneficiaries receiving an 18-month maximum period of continuation coverage if the qualified beneficiaries experience a second qualifying event. This second event can be a second qualifying event only if it would have caused the qualified beneficiary to lose coverage under the plan in the absence of the first qualifying event.
The plan must have procedures for how a qualified beneficiary should provide notice of a second qualifying event. Describe these rule’s in your plan’s SPD (and in the election notice for any offer of an 18-month period of continuation coverage). A plan can set a time limit for providing this notice, but the time limit cannot be shorter than 60 days from the latest of:
- The date on which the qualifying event occurs
- When the qualified beneficiary loses (or would lose) coverage under the plan as a result of the qualifying event, or
- 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.
Now you know what benefits COBRA provides and all continuation coverage election procedures. Knowing this is essential for avoiding the potential hefty fees that can result from noncompliance with COBRA. And check back tomorrow for Part 4 of our COBRA deep-dive when we examine paying for continuation coverage and those COBRA penalties.