Transcription

AN EMPLOYEE’S GUIDE TOHEALTH BENEFITS UNDERCOBRAEMPLOYEE BENEFITS SECURITY ADMINISTRATIONUNITED STATES DEPARTMENT OF LABOR

This publication has been developed by the U.S. Department of Labor,Employee Benefits Security Administration (EBSA).To view this and other publications, visit the agency’s Website at dol.gov/agencies/ebsa.To order publications, or to speak with a benefits advisor, contact EBSA electronically ataskebsa.dol.gov.Or call toll free: 1-866-444-3272This material will be made available in alternative formatto persons with disabilities upon request:Voice phone: (202) 693-8664TTY: (202) 501-3911This booklet constitutes a small entity compliance guide for purposes of theSmall Business Regulatory Enforcement Fairness Act of 1996.

ContentsIntroduction .1What Is COBRA Continuation Coverage? .2Who Is Entitled to Continuation Coverage? .4Your COBRA Rights and Responsibilities:Notice and Election Procedures .5Benefits under Continuation Coverage .8Duration of Continuation Coverage .8Chart: Summary of Qualifying Events,Qualified Beneficiaries, andMaximum Periods of Continuation Coverage.10Paying for Continuation Coverage .11Health Coverage Tax Credit.11Coordination with Other Federal Benefit Laws .12Role of the Federal Government .12Resources .13

IntroductionA health plan helps workers and their familiestake care of their essential medical needs. It isone of the most important benefits providedby an employer.There was a time when employer-provided group health coverage was at risk if anemployee was fired, changed jobs, or got divorced. Under the Consolidated OmnibusBudget Reconciliation Act (COBRA), many employees and their families who would losegroup health coverage because of serious life events are able to continue their coverageunder the employer’s group health plan, usually at their own expense, at least for limitedperiods of time.This booklet explains your rights under COBRA to a temporary extension of employer-provided group health coverage,called COBRA continuation coverage.This booklet will: Provide a general explanation of your COBRA rights and responsibilities;Outline the COBRA rules that group health plans must follow;Highlight your rights to benefits while you are receiving COBRA continuation coverage.AN EMPLOYEE’S GUIDE TO HEALTH BENEFITS UNDER COBRA1

What Is COBRA Continuation Coverage?The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires most group health plans to provide a temporarycontinuation of group health coverage that otherwise might be terminated.COBRA requires continuation coverage to be offered to covered employees, their spouses, their former spouses, andtheir dependent children when group health coverage would otherwise be lost due to certain specific events. Those eventsinclude the death of a covered employee, termination or reduction in the hours of a covered employee’s employmentfor reasons other than gross misconduct, divorce or legal separation from a covered employee, a covered employee’sbecoming entitled to Medicare, and a child’s loss of dependent status (and therefore coverage) under the plan.Employers may require individuals who elect continuation coverage to pay the full cost of the coverage, plus a 2 percentadministrative charge. The required payment for continuation coverage is often more expensive than the amount thatactive employees are required to pay for group health coverage, since the employer usually pays part of the cost ofemployees’ coverage and all of that cost can be charged to the individuals receiving continuation coverage. WhileCOBRA continuation coverage must be offered, it lasts only for a limited period of time. This booklet will discuss all ofthese provisions in more detail.COBRA generally applies to all group health plans maintained by private-sector employers (with at least 20 employees)or by state and local governments. The law does not apply, however, to plans sponsored by the Federal Government or bychurches and certain church-related organizations. In addition, many states have laws similar to COBRA, including thosethat apply to health insurers of employers with less than 20 employees (sometimes called mini-COBRA). Check with yourstate insurance commissioner’s office to see if such coverage is available to you.Under COBRA, a group health plan is any arrangement that an employer establishes or maintains to provide employeesor their families with medical care, whether it is provided through insurance, by a health maintenance organization, out ofthe employer’s assets on a pay-as-you-go basis, or otherwise. “Medical care” typically covered by a group health plan forthis purpose includes: Inpatient and outpatient hospital care;Physician care;Surgery and other major medical benefits;Prescription drugs;Dental and vision care.Life insurance is not considered “medical care,” nor are disability benefits. COBRA does not cover plans that provideonly life insurance or disability benefits.Group health plans covered by COBRA that are sponsored by private-sector employers generally are governed by ERISA– the Employee Retirement Income Security Act of 1974. ERISA does not require employers to establish plans or toprovide any particular type or level of benefits, but it does require plans to comply with ERISA’s rules. ERISA givesparticipants and beneficiaries rights that are enforceable in court.2UNITED STATES DEPARTMENT OF LABOR

Alternatives to COBRA Continuation CoverageIf you become entitled to elect COBRA continuation coverage when you otherwise would lose group health coverageunder a group health plan, you should consider all options you may have to get other health coverage before you makeyour decision. There may be more affordable or more generous coverage options for you and your family through othergroup health plan coverage (such as a spouse’s plan), the Health Insurance Marketplace, or Medicaid.Under the Health Insurance Portability and Accountability Act (HIPAA), if you or your dependents are losing eligibilityfor group health coverage, including eligibility for continuation coverage, you may have a right to special enroll (enrollwithout waiting until the next open season for enrollment) in other group health coverage. For example, an employeelosing eligibility for group health coverage may be able to special enroll in a spouse’s plan. A dependent losing eligibilityfor group health coverage may be able to enroll in a different parent’s group health plan. To have a special enrollmentopportunity, you or your dependent must have had other health coverage when you previously declined coverage in theplan in which you now want to enroll. You must request special enrollment within 30 days from the loss of your job-basedcoverage.Losing your job-based health coverage is also a special enrollment event in the Health Insurance Marketplace(Marketplace). The Marketplace offers “one-stop shopping” to find and compare private health insurance options. Inthe Marketplace, you could be eligible for a tax credit that lowers your monthly premiums and cost-sharing reductions(amounts that lower your out-of-pocket costs for deductibles, coinsurance, and copayments), and you can see what yourpremium, deductibles, and out-of-pocket costs will be before you make a decision to enroll.Eligibility for COBRA continuation coverage won’t limit your eligibility for Marketplace coverage or for a tax credit.You can apply for Marketplace coverage at HealthCare.gov or by calling 1-800-318-2596 (TTY 1-855-8894325). To qualify for special enrollment in a Marketplace plan, you must select a plan within 60 days before or 60 daysafter losing your job-based coverage. In addition, during an open enrollment period, anyone can enroll in Marketplacecoverage. If you need health coverage in the time between losing your job-based coverage and beginning coveragethrough the Marketplace (for example, if you or a family member needs medical care), you may wish to elect COBRAcoverage from your former employer’s plan. COBRA continuation coverage will ensure you have health coverage untilthe coverage through your Marketplace plan begins.Through the Marketplace you can also learn if you qualify for free or low-cost coverage from Medicaid or the Children’sHealth Insurance Program (CHIP). You can apply for and enroll in Medicaid or CHIP any time of year. If you qualify,your coverage begins immediately. Visit HealthCare.gov or call 1-800-318-2596 (TTY 1-855-889-4325)for more information or to apply for these programs. You can also apply for Medicaid by contacting your state Medicaidoffice and learn more about the CHIP program in your state by calling 1-877-KIDS NOW (543-7669) or visitinginsurekidsnow.gov on the Web.If you or your dependent elects COBRA continuation coverage, you will have another opportunity to request specialenrollment in a group health plan or a Marketplace plan if you have a new special enrollment event, such as marriage,the birth of a child, or if you exhaust your continuation coverage. To exhaust COBRA continuation coverage, you or yourdependent must receive the maximum period of continuation coverage available without early termination. Keep in mindif you choose to terminate your COBRA continuation coverage early with no special enrollment opportunity at that time,you generally will have to wait to enroll in other coverage until the next open enrollment period for the new group healthplan or the Marketplace.AN EMPLOYEE’S GUIDE TO HEALTH BENEFITS UNDER COBRA3

Who Is Entitled to Continuation Coverage?There are three basic requirements that must be met in order for you to be entitled to elect COBRA continuation coverage: Your group health plan must be covered by COBRA;A qualifying event must occur; andYou must be a qualified beneficiary for that event.Plan CoverageCOBRA covers group health plans sponsored by an employer (private-sector or state/local government) that employed atleast 20 employees on more than 50 percent of its typical business days in the previous calendar year. Both full- and parttime employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fractionof a full-time employee, with the fraction equal to the number of hours that the part-time employee worked divided by thehours an employee must work to be considered full-time.Qualifying Events“Qualifying events” are events that cause an individual to lose his or her group health coverage. The type of qualifyingevent determines who the qualified beneficiaries are for that event and the period of time that a plan must offer continuationcoverage. COBRA establishes only the minimum requirements for continuation coverage. A plan may always choose toprovide longer periods of continuation coverage.The following are qualifying events for a covered employee if they cause the covered employee to lose coverage: Termination of the employee’s employment for any reason other than “gross misconduct”; orReduction in the number of hours of employment.The following are qualifying events for the spouse and dependent child of a covered employee if they cause the spouse ordependent child to lose coverage: Termination of the covered employee’s employment for any reason other than “gross misconduct”;Reduction in the hours worked by the covered employee;Covered employee becomes entitled to Medicare;Divorce or legal separation of the spouse from the covered employee; orDeath of the covered employee.In addition to the above, the following is a qualifying event for a dependent child of a covered employee if it causes thechild to lose coverage: 4Loss of “dependent child” status under the plan rules. Under the Affordable Care Act, plans that offer coverage tochildren on their parents’ plan must make the coverage available until the adult child reaches the age of 26.UNITED STATES DEPARTMENT OF LABOR

Qualified BeneficiariesA qualified beneficiary is an individual who was covered by a group health plan on the day before a qualifying eventoccurred that caused him or her to lose coverage. Only certain individuals can become qualified beneficiaries due to aqualifying event, and the type of qualifying event determines who can become a qualified beneficiary when it happens. Aqualified beneficiary must be a covered employee, the employee’s spouse or former spouse, or the employee’s dependentchild. In certain cases involving the bankruptcy of the employer sponsoring the plan, a retired employee, the retiredemployee’s spouse (or former spouse), and the retired employee’s dependent children may be qualified beneficiaries.In addition, any child born to or placed for adoption with a covered employee during a period of continuation coverageis automatically considered a qualified beneficiary. An employer’s agents, independent contractors, and directors whoparticipate in the group health plan may also be qualified beneficiaries.Your COBRA Rights and Responsibilities:Notice and Election ProceduresUnder COBRA, group health plans must provide covered employees and their families with certain notices explaining theirCOBRA rights. Plans must also have rules for how COBRA continuation coverage is offered, how qualified beneficiariesmay elect continuation coverage, and when it can be terminated.Notice ProceduresSummary Plan DescriptionThe COBRA rights provided under the plan must be described in the plan’s Summary Plan Description (SPD). The SPDis a written document that gives important information about the plan, including what benefits are available under theplan, the rights of participants and beneficiaries under the plan, and how the plan works. ERISA requires group healthplans to give you an SPD within 90 days after you first become a participant in a plan (or within 120 days after the planis first subject to the reporting and disclosure provisions of ERISA). In addition, if there are material changes to the plan,the plan must give you a Summary of Material Modifications (SMM) not later than 210 days after the end of the plan yearin which the changes become effective; if the change is a material reduction in covered services or benefits, the SMM mustbe furnished not later than 60 days after the reduction is adopted. A participant or beneficiary covered under the plan mayrequest a copy of the SPD and any SMMs (as well as any other plan documents), which must be provided within 30 days ofa written request.COBRA General NoticeGroup health plans must give each employee and each spouse who becomes covered under the plan a general noticedescribing COBRA rights. The general notice must be provided within the first 90 days of coverage. Group health planscan satisfy this requirement by giving you the plan’s SPD within this time period, as long as it contains the general noticeinformation. The general notice should contain the information that you need to know in order to protect your COBRArights when you first become covered under the plan, including the name of the plan and someone you can contact for moreinformation, a general description of the continuation coverage provided under the plan, and an explanation of any noticesyou must give the plan to protect your COBRA rights.AN EMPLOYEE’S GUIDE TO HEALTH BENEFITS UNDER COBRA5

COBRA Qualifying Event NoticesBefore a group health plan must offer continuation coverage, a qualifying event must occur, and the group health plan mustbe notified of the qualifying event. Who must give notice of the qualifying event depends on the type of qualifying event.The employer must notify the plan if the qualifying event is: Termination or reduction in hours of employment of the covered employee;Death of the covered employee;A covered employee becoming entitled to Medicare; orBankruptcy of a private-sector employer.The employer must notify the plan within 30 days of the event.You (the covered employee or one of the qualified beneficiaries) must notify the plan if the qualifying event is: Divorce;Legal separation; orA child’s loss of dependent status under the plan.You should understand your plan’s rules for how to provide notice if one of these qualifying events occurs. The plan musthave procedures for how to give notice of the qualifying event, and the procedures should be described in both the generalnotice and the plan’s SPD. The plan can set a time limit for providing this notice, but the time limit cannot be shorter than60 days, starting from the latest of: (1) the date on which the qualifying event occurs; (2) the date on which you lose (orwould lose) coverage under the plan as a result of the qualifying event; or (3) the date on which you are informed, throughthe furnishing of either the SPD or the COBRA general notice, of the responsibility to notify the plan and the proceduresfor doing so.If your plan does not have reasonable procedures for how to give notice of a qualifying event, you can give notice bycontacting the person or unit that handles your employer’s employee benefits matters. If your plan is a multiemployer plan,notice can also be given to the joint board of trustees, and, if the plan is administered by an insurance company (or thebenefits are provided through insurance), notice can be given to the insurance company.COBRA Election NoticeWhen the plan receives a notice of a qualifying event, the plan must give the qualified beneficiaries an election notice,which describes their rights to continuation coverage and how to make an election. The notice must be provided tothe qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event. Theelection notice should contain all of the information you will need to understand continuation coverage and make aninformed decision whether or not to elect continuation coverage. It should also give you the name of the plan’s COBRAadministrator and tell you how to get more information.COBRA Notice of Unavailability of Continuation CoverageGroup health plans may sometimes deny a request for continuation coverage or for an extension of continuation coverage.If you or any member of your family requests continuation coverage or an extension of continuation coverage and the plandetermines that you or your family member is not entitled to the requested coverage for any reason, the plan must give theperson who requested it a notice of unavailability of continuation coverage. The notice must be provided within 14 daysafter the request is received, and the notice must explain the reason for denying the request.6UNITED STATES DEPARTMENT OF LABOR

COBRA Notice of Early Termination of Continuation CoverageContinuation coverage must generally be made available for a maximum period (18, 29, or 36 months). The grouphealth plan may terminate continuation coverage earlier, however, for any number of specific reasons. (See “Duration ofContinuation Coverage” later in this booklet.) When a group health plan decides to terminate continuation coverage earlyfor any of these reasons, the plan must give the qualified beneficiary a notice of early termination. The notice must begiven as soon as practicable after the decision is made, and it must describe the date coverage will terminate, the reason fortermination, and any rights the qualified beneficiary may have under the plan or app