What is COBRA?
COBRA is an acronym for a federal law that was passed as part of the Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA is not a type of insurance or an insurance company.What's the general purpose of COBRA?
COBRA allows certain individuals who experience a "qualifying event" to continue coverage under a group health plan (that's why it's called continuation coverage). These individuals are known as qualified beneficiaries.Who are qualified beneficiaries?
A qualified beneficiary is generally an individual who was covered by a group health plan the day before a qualifying event happens and who is either the covered employee, the employee's spouse, or the employee's dependent child.What is a qualifying event?
A qualifying event is an event that causes a covered employee or family member to lose coverage under the plan.
Note: An event is a qualifying event only if it causes a loss of coverage under the plan. For example, if an employee's hours are reduced but the employee remains eligible for coverage under the plan, the event is not a qualifying event.What are the various types of qualifying events?
If you're an employee, you'll become a qualified beneficiary if you lose coverage under the plan because one of these events happens to you:
- Your hours of employment are reduced, or
- Your employment ends for any reason (including voluntary termination) other than your gross misconduct.
If you're the spouse of an employee, you'll become a qualified beneficiary if you lose your coverage under the plan because of the following qualifying events:
- Your spouse dies;
- Your spouse's hours of employment are reduced;
- Your spouse's employment ends for any reason other than his or her gross misconduct;
- Your spouse becomes entitled to Medicare benefits (under Part A, Part B, or both); or
- You become divorced or legally separated from your spouse.
Your dependent children will become qualified beneficiaries if they lose coverage under the plan because of the following qualifying events:
- The parent-employee dies;
- The parent-employee's hours of employment are reduced;
- The parent-employee's employment ends for any reason other than his or her gross misconduct;
- The parent-employee becomes entitled to Medicare benefits (Part A, Part B, or both);
- The parents become divorced or legally separated; or
- The child stops being eligible for coverage under the plan as a "dependent child."
Sometimes, filing a proceeding in bankruptcy under title 11 of the United States Code can be a qualifying event. If a proceeding in bankruptcy is filed and that bankruptcy results in the loss of coverage of any retired employee covered under the plan, the retired employee will become a qualified beneficiary. The retired employee's spouse, surviving spouse, and dependent children will also become qualified beneficiaries if bankruptcy results in the loss of their coverage under the plan.Can newborns and adopted children be qualified beneficiaries?
A child born to, adopted by, or placed for adoption with a covered employee during a period of COBRA coverage is a qualified beneficiary if the covered employee is also a qualified beneficiary and has elected COBRA coverage. COBRA coverage for the child begins when the child is enrolled in the plan (through "special enrollment" rights or during open enrollment), and it lasts for as long as COBRA coverage lasts for other family members of the employee.
Children Receiving Benefits Through a QMCSO
A child of the covered employee who is receiving benefits under the plan due to a Qualified Medical Child Support Order (QMCSO) is entitled to the same rights to elect COBRA as an eligible dependent child of the covered employee.
Why does being a qualified beneficiary matter?
Qualified beneficiaries must be treated the same as "similarly situated active employees." That means qualified beneficiaries are entitled to the same benefits, choices, and services as active employees from the same working class or group.
Perhaps most importantly, each qualified beneficiary has a separate right to elect COBRA continuation coverage. For example, the employee's spouse may elect continuation coverage even if the employee does not. COBRA continuation coverage may be elected for only one, several, or all dependent children who are qualified beneficiaries. A parent may elect continuation coverage on behalf of any dependent children. The employee or the employee's spouse (if the spouse is a qualified beneficiary) can elect continuation coverage on behalf of all qualified beneficiaries.What is the definition of a group health plan?
As defined by the Department of Labor (DOL), a group health plan is an employee welfare benefit plan established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance, reimbursement, or otherwise.
For this purpose, "medical care" includes:
- Inpatient and outpatient hospital care
- Physician care
- Surgery and other major medical benefits
- Prescription drugs
- Dental and vision care
What plans are subject to COBRA?
COBRA generally applies to all group health plans with the following exceptions:
- Plans sponsored by the federal government
- Plans sponsored by churches or church-related organizations
- Plans sponsored by small employers (defined as employers with less than 20 employees)
Some states have laws that are similar to COBRA and apply to employers with less than 20 employees. You can check with your state insurance commissioner office for more information.What types of component plans are subject to COBRA?
COBRA generally applies to medical, dental, and vision plans. COBRA also applies to:
- Health reimbursement arrangements (HRA)
- Employer-maintained prescription drug plans
- Disease-specific cancer policies that provide medical care
- Wellness programs that provide medical care
COBRA may also apply to health flexible spending accounts in certain situations (see below for more information).
COBRA does not apply to life insurance or disability benefits.How long do I have to elect COBRA?
If you experience a qualifying event, you will receive a COBRA election form. You generally have 60 days to elect COBRA, measured from the postmark date of the election notice. Be sure to follow the directions on the form and return the signed form by the deadline specified on the form.
If you fail to return a completed and signed form before the deadline, you and any family members lose your right to elect continuation coverage under the plan.Who can elect COBRA coverage?
Each qualified beneficiary has a separate right to elect COBRA continuation coverage. For example, the employee's spouse may elect continuation coverage even if the employee does not. COBRA continuation coverage may be elected for only one, several, or all dependent children who are qualified beneficiaries. A parent may elect continuation coverage on behalf of any dependent children. The employee or the employee's spouse (if the spouse is a qualified beneficiary) can elect continuation coverage on behalf of all qualified beneficiaries.What coverage can I elect?
You may elect COBRA continuation coverage under the same component plan(s) you were covered under the day before the qualifying event. For example, if you were covered under the medical and dental components on the day before your qualifying event, you may elect continuation coverage for medical only, dental only, or both. However, you cannot elect continuation coverage under the vision component because you were not covered under the vision component the day before the qualifying event.Can I elect COBRA continuation coverage if I already have other coverage?
Qualified beneficiaries who are entitled to elect continuation coverage may do so even if they have other group health plan coverage or are entitled to Medicare benefits on or before their continuation coverage election date. However, continuation coverage will terminate if you first become covered under another group health or become entitled to Medicare after electing continuation coverage.How does COBRA apply to health flexible spending accounts (FSA)?
Special rules apply to electing continuation coverage under the health FSA component. Only qualified beneficiaries who have "underspent accounts" may elect to continue their health FSA component under COBRA. An account is underspent if the amount remaining in the account is greater than the cost to continue health FSA coverage under COBRA for the remainder of the plan year.
Example: If it would cost $612 to continue the health FSA under COBRA for the remainder of the year, but the amount left in the account is greater than $612, the account is underspent.
If elected, continuation coverage for the health FSA is equal to the coverage in force at the time of the qualifying event (i.e., the health FSA election amount reduced by the amount of any reimbursable claims submitted up to the time of the qualifying event).
Unlike other component plans, coverage under the health FSA is only available through the end of the current health FSA plan year. For example, if you terminate in June and your health FSA has a calendar plan year, continuation coverage for the health FSA is only available through December 31, even though your maximum COBRA coverage period is 18 months.
The use-or-lose rule continues to apply under COBRA, so any unused amount will be forfeited at the end of the plan year.Can I waive my right to COBRA coverage? If I do, can I change my mind?
Yes, you can waive your right to COBRA coverage.
If you waive COBRA continuation coverage before the due date, you may change your mind if you submit a completed election form before the due date. However, if you change your mind after first waiving COBRA continuation coverage, your COBRA continuation coverage will begin on the date you submit the completed election form.How much does COBRA continuation coverage cost?
Generally, qualified beneficiaries are required to pay for COBRA continuation coverage. You cannot be charged more than 102 percent of the cost to the group health plan for coverage of a similarly situated employee who is not receiving COBRA continuation coverage (except during a disability extension period, when the charge may be up to 150 percent).
You may be able to get coverage through the Health Insurance Marketplace that costs less than COBRA continuation coverage. You can learn more about the Marketplace below.How long do I have to make the first payment for coverage?
You must make your first payment for continuation coverage no later than 45 days after the date of your election (the date the election notice is postmarked). If you do not make full payment before the 45-day deadline expires, you and any family members lose your rights to continuation coverage under the plan.How do I pay for ongoing coverage?
After you make your first payment for continuation coverage, you are permitted to make monthly payments for ongoing coverage. All ongoing premium payments for continuation coverage are due on the first of each month. Although UnifyHR provides a courtesy monthly reminder notice, you must still make payments even if you don't receive this notice.
Federal law gives you a 30-day grace period to submit your payment. You must make payment before the end of the 30th day. If you make payment by mail, your payment must be postmarked by the 30th day. Any payments postmarked after the 30th day of the month will be returned to you.
Please note: It may take up to seven business days after your account is paid current before your carrier(s) list you as active and eligible for service. Claims are paid only when the premiums for that period of coverage have been paid in full. Making payments before the first of the month will help avoid delays in claims processing and can help prevent issues receiving services or filling prescriptions.
If you do not make full payment before the deadline, your continuation coverage will terminate retroactively to the last fully paid month. For example, if you fail to make timely payment for February, your coverage will terminate effective the first day of February (only claims incurred through January 31 will be eligible for payment).
If you submit payments after the deadline, or if you submit payment and are then determined to be ineligible for coverage, we will return your payment(s) to you. Submission of premiums, or acceptance of premiums by UnifyHR, does not indicate that coverage is in force.
If your coverage is canceled for non-payment or late payment of premiums, it cannot be reinstated.How long does COBRA continuation coverage last?
COBRA requires that continuation coverage extends from the date of the qualifying event for a period of 18 or 36 months, depending on who you are and the type of qualifying event you experienced.
Continuation coverage under COBRA generally lasts for 18 months due to employment termination or a reduction in hours worked.
Certain qualifying events lead to a maximum of 36 months of continuation coverage. These "36-month" qualifying events include the death of an employee, the covered employee's divorce or legal separation, or a dependent child's losing eligibility as a dependent child. In limited circumstances, the covered employee's entitlement to Medicare may also be a qualifying event.
Continuation coverage may end before the date noted above in certain circumstances like failure to pay premiums, fraud, or the individual becomes covered under Medicare or another group health plan.
A Special Note About Medicare: When the qualifying event 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 can last until 36 months after the date the employee becomes entitled to Medicare. For example, if a covered employee becomes entitled to Medicare eight months before the date his/her employment ends (termination of employment is the COBRA qualifying event), COBRA coverage for his/her spouse and children would last 28 months (36 months minus eight months).
Can I extend the length of COBRA continuation coverage?
If you elect continuation coverage, you may be able to extend the length of continuation coverage if a qualified beneficiary is disabled, or if a second qualifying event occurs. You must notify UnifyHR of a disability or a second qualifying event within a certain amount of time to extend the period of continuation coverage. If you don't provide notice of a disability or second qualifying event within the required amount of time, it will affect your right to extend the period of continuation coverage.
For more information about extending the length of COBRA continuation coverage, download the PDF document titled "An Employees Guide to Health Benefits Under COBRA" from the Department of Labor (DOL) website.What are the rules regarding the disability extension?
If one of the qualified beneficiaries in a family is disabled and meets certain requirements, all of 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. The requirements are:
- The Social Security Administration (SSA) must determine that the disabled qualified beneficiary is disabled before the 60th day of continuation coverage; and,
- The disability continues during the rest of the initial 18-month period of continuation coverage.
The disabled qualified beneficiary (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 on which SSA issues the disability determination;
- The date on which the qualifying event occurs;
- The date on which 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.
The right to the disability extension may be terminated if SSA determines that the disabled qualified beneficiary is no longer disabled. The 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.
An extension of coverage due to a determination of disability is available only if you notify UnifyHR of the disability determination. This notice must be provided within 60 days as described above. To provide notice, you must use the form titled "Notice of Disability" available from UnifyHR, and you must follow the procedures outlined in the notice. Additional information is available in the "Notice Procedures" section later in this document.What is secondary qualifying event and how do they work?
It may be possible for qualified beneficiaries to extend their original 18-month period of COBRA continuation coverage for an additional 18 months (for a total maximum coverage period of 36 months) if they experience a second qualifying event. Second qualifying events are:
- Death of the covered employee
- Divorce or legal separation of the covered employee and spouse
- Medicare entitlement (only in certain circumstances)
- The loss of dependent child status under the plan.
The additional period of coverage is available only if the second event would have caused the qualified beneficiary to lose coverage under the plan (assuming the first event had not happened).
An extension of coverage due to a second qualifying event is available only if you notify UnifyHR that the second qualifying event has happened. This notice must be provided within 60 days after the date of the second qualifying event. To provide notice, you must use the form titled "Notice of Second Qualifying Event" available from UnifyHR, and you must follow the procedures outlined in the notice. Additional information is available in the "Notice Procedures" section later in this document.How can I lose my COBRA coverage?
You can lose COBRA coverage early (before the maximum period of coverage expires) for the following reasons:
- You fail to make full payment for coverage on a timely basis
- Your former employer ceases to maintain any group health plan
- You become covered under another group health plan after electing continuation coverage
- You become entitled to Medicare benefits after electing continuation coverage
- You engage in conduct that would justify the termination of your coverage (such as fraud)
If your continuation coverage is terminated early, you will receive a notice that outlines the date coverage will terminate, the reason for termination, and any rights you may have under the plan or applicable law to elect alternative coverage. This notice will also include instructions for filing an appeal.
If you decide to terminate your COBRA coverage early, you generally won't be able to get a Marketplace plan outside of the open enrollment period.Are there other coverage options besides COBRA continuation coverage?
Yes. Instead of enrolling in COBRA continuation coverage, there may be other more affordable coverage options for you and your family through the Health Insurance Marketplace, Medicaid, or other group health plans (such as a spouse's plan) through what is called a "special enrollment period." Some of these options may cost less than COBRA continuation coverage.
You should compare your other coverage options with COBRA continuation coverage and choose the coverage that is best for you. For example, if you move to other coverage, you may pay more out of pocket than you would under COBRA because the new coverage may impose a new deductible.
When you lose job-based health coverage, it's important that you choose carefully between COBRA continuation coverage and other coverage options, because once you've made your choice, it can be difficult or impossible to switch to another coverage option.What is the Health Insurance Marketplace?
The Marketplace offers "one-stop shopping" to find and compare private health insurance options. In the Marketplace, you could be eligible for a new kind of tax credit that lowers your monthly premiums and cost-sharing reductions (amounts that lower your out-of-pocket costs for deductibles, coinsurance, and copayments) right away, and you can see what your premium, deductibles, and out-of-pocket costs will be before you make a decision to enroll. Through the Marketplace, you'll also learn if you qualify for free or low-cost coverage from Medicaid or the Children's Health Insurance Program (CHIP). You can access the Marketplace for your state at www.HealthCare.gov.
Coverage through the Health Insurance Marketplace may cost less than COBRA continuation coverage. Being offered COBRA continuation coverage won't limit your eligibility for coverage or a tax credit through the Marketplace.
If you elect through the Marketplace, you may experience a gap in coverage between the date you lose coverage under the group health plan, and the date coverage begins through the Marketplace (you will not experience a gap if you elect and pay for COBRA continuation coverage).When can I enroll in Marketplace coverage?
You always have 60 days from the time you lose your job-based coverage to enroll in the Marketplace. That is because losing your job-based health coverage is a "special enrollment" event. After 60 days, your special enrollment period will end, and you may not be able to enroll, so you should take action right away. Also, during what is called an "open enrollment" period, anyone can enroll in Marketplace coverage.
To find out more about enrolling in the Marketplace, such as when the next open enrollment period will be and what you need to know about qualifying events and special enrollment periods, visit www.HealthCare.gov.If I sign up for COBRA continuation coverage, can I switch to coverage in the Marketplace? What if I choose Marketplace coverage and want to switch back to COBRA continuation coverage?
If you sign up for COBRA continuation coverage, you can switch to a Marketplace plan during a Marketplace open enrollment period. You can also end your COBRA continuation coverage early and switch to a Marketplace plan if you have another qualifying event such as marriage or birth of a child through something called a "special enrollment period." But be careful though - if you terminate your COBRA continuation coverage early without another qualifying event, you'll have to wait to enroll in Marketplace coverage until the next open enrollment period, and could end up without any health coverage in the interim.
Once you've exhausted your COBRA continuation coverage and the coverage expires, you'll be eligible to enroll in Marketplace coverage through a special enrollment period, even if Marketplace open enrollment has ended.
If you sign up for Marketplace coverage instead of COBRA continuation coverage, you cannot switch to COBRA continuation coverage under any circumstances.Can I enroll in another group health plan?
You may be eligible to enroll in coverage under another group health plan (like a spouse's plan) if you request enrollment within 30 days of the loss of coverage. If you or your dependent chooses to elect COBRA continuation coverage instead of enrolling in another group health plan for which you're eligible, you'll have another opportunity to enroll in the other group health plan within 30 days of losing your COBRA continuation coverage.What factors should I consider when choosing coverage options?
When considering your options for health coverage, you may want to think about:
- Premiums: Your previous plan can charge up to 102% of total plan premiums for COBRA coverage. Other options, like coverage on a spouse's plan or through the Marketplace, may be less expensive.
- Provider Networks: If you're currently getting care or treatment for a condition, a change in your health coverage may affect your access to a particular health care provider. You may want to check to see if your current health care providers participate in a network as you consider options for health coverage.
- Drug Formularies: If you're currently taking medication, a change in your health coverage may affect your costs for medication - and in some cases, your medication may not be covered by another plan. You may want to check to see if your current medications are listed in drug formularies for other health coverage.
- Severance payments: If you lost your job and got a severance package from your former employer, your former employer may have offered to pay some or all of your COBRA payments for a period of time. In this scenario, you may want to contact the Department of Labor at 1-866-444-3272 to discuss your options.
- Service Areas: Some plans limit their benefits to specific service or coverage areas - so if you move to another area of the country, you may not be able to use your benefits. You may want to see if your plan has a service or coverage area, or other similar limitations.
- Other Cost-Sharing: In addition to premiums or contributions for health coverage, you probably pay copayments, deductibles, coinsurance, or other amounts as you use your benefits. You may want to check to see what the cost-sharing requirements are for other health coverage options. For example, one option may have much lower monthly premiums, but a much higher deductible and higher copayments.
