Administering COBRA and Providing Certificates of Group Health Coverage
Purpose of Process:
A federal law (Public Law 92-272, Title X, commonly known as
COBRA) requires that employers with 20 or more employees
(employers with 2 to 19 employees in the state of California must
offer "Cal-COBRA" health
continuation coverage), offer the employees and their
families the opportunity for a temporary extension of health
coverage (called "continuation coverage") at group rates, in
certain circumstances where coverage under the plan would
otherwise end.
A Certificate of Group Health Coverage form must be provided when:
- An individual loses coverage (employee or dependent),
- An individual becomes covered under COBRA,
- COBRA coverage ends, and
- Upon an individual's request (provided the request is made no more than 24 months after coverage ceases).
The Certificate must be provided at the same time that COBRA Election form is given.
Recommended Steps in the Process:
- Mail the Initial COBRA Notification
letter to new hires' home address upon acceptance of the
employment offer. Include the General Notice of COBRA Continuation Coverage Rights.
- Discuss the COBRA rights and responsibilities with the
employee during the new hire orientation.
- In the event an employee loses coverage due to termination or
a reduction in hours, provide the qualified beneficiary(ies)
with a COBRA Election Form and a Certificate of Group Health Coverage form
within 14 days after receiving notification of the qualifying
event. If your company provides, and the employee selected, a
Health Care Spending Account, then provide the employee with a Health Care Spending Account Continuation
of Coverage Election form.
- In the event of a divorce or legal separation or a child loses
dependent status, the employee or qualified beneficiary(ies)
must provide written notification to the designated company
representative within 60 days of the qualifying event (see sample
notification letter) or, if later, the date that the
qualified beneficiary would lose coverage on account of the
qualifying event.
- Provide the qualified beneficiary(ies) with a COBRA
Election Form and a Certificate of
Group Health Coverage form within 14 days after receiving
notification of the qualifying event.
- The qualified beneficiary(ies) may elect COBRA coverage at any
time within 60 days after the plan coverage terminates, or, if
later, 60 days after the notice to the qualified
beneficiary(ies).
- Send a reminder notice to the qualified beneficiary(ies) who
has not submitted a completed COBRA Election Form within 30 days
of the qualifying event.
- Send a final cancellation notice to the qualified
beneficiary(ies) who has not submitted a completed COBRA
Election Form within 60 days.
- Maintain a COBRA log to track all COBRA applicants during the
60 day election period.
- Stop reimbursement of health care expenses until the employee
has paid the premium.
- The initial premium payment is due within 45 days of the date
the qualified beneficiary(ies) signed the COBRA Election Form.
The initial premium payment must include all past due premiums
to reinstate the health coverage elected. The plan must allow
payments to be made in monthly installments, but can permit
alternative payment intervals (e.g., quarterly or
semi-annually).
- After the initial premium payment is made, bill the qualified
beneficiary(ies) once per month. Require monthly premium
payments to be made by the first of the month. Any payment
received 30 days after this date will result in the qualified
beneficiary(ies) continuation coverage being canceled.
(Note that the COBRA Regulations require that if a payment is made and it is short by an insignificant amount (undefined), the plan must treat the payment as payment in full or it must notify the qualified beneficiary of the amount of the deficiency and grant a reasonable period of time (safe harbor: 30 days) for the deficiency to be paid.)
- Send out a reminder notice to the qualified beneficiary(ies)
for whom you have not received a payment (usually around the
20th of the month, when the monthly billing is processed).
- Subsequently, if the payment is not received by the next
billing cycle, send out a cancellation notice to the qualified
beneficiary(ies).
- The employee and/or covered dependents may elect to continue
coverage for up to 18 months if:
- The employee's job ends for any reason except gross misconduct.
- The employee's hours are reduced below the required
minimum to be eligible for coverage.
- The employee's spouse or dependent children may elect to
continue coverage for up to 36 months if:
- The employee is divorced or legally separated.
- The employee's child is not eligible for coverage any more.
- The employee dies.
- The employee becomes entitled to Medicare.
- Coverage ends before 18 or 36 months if:
- The premium payment is not paid in timely manner.
- The employee or dependent becomes covered under any other group medical plan that does not restrict coverage for pre-existing conditions. [Note that COBRA eligibility does not end if the COBRA continuee has other health plan coverage that began before the COBRA qualifying event.] COBRA coverage does not end for members of the same family who are not covered under another group medical plan.
- The employee or dependent becomes entitled to Medicare coverage. However, COBRA coverage does not end for members of the same family who are not entitled to Medicare.
- All company sponsored group health plans end.
- If during the 18 months of continuation coverage, a second
event takes place (divorce, legal separation, death, Medicare
entitlement, or a dependent child ceasing to be a dependent),
then the 18 months can be extended to 36 months from the date of
the original qualifying event date.
- The COBRA continuee can add a dependent who is born or adopted
during the COBRA continuation period. COBRA qualified
beneficiaries may also change coverage status, (i.e. from
individual to family) under the same terms as active employees
upon the birth or adoption of a child.
- The 18 months of continuation coverage can be extended to 29
months if the Social Security Administration determines that a
qualified beneficiary was disabled within 60 days of the
qualifying event according to Title II or XVI of the Social
Security Act. During the disability extension, the disabled
continuee can be charged a health premium equal to 150% of the
company's premium cost. It is the responsibility of the
qualified beneficiary to present the disability determination to
the designated company representative with 60 days of the
determination and within 18 months of initial coverage.
- The state of California enacted the Extension of Medical
Coverage After COBRA (SB 1910) Act on January 1, 1995. It
applies only to fully insured plans. To be eligible for this
additional coverage, the former employee must be at least age 60
and had worked continuously for the employer at least the five
years prior to the date of termination. Additionally, coverage
may only be elected if former employee was on COBRA for the
maximum applicable period. This same rule also applies to the
spouse. Under this law, the "after-COBRA" coverage may be
extended until the earliest of the following dates:
- The date the individual reaches age 65;
- The date the individual is entitled to Medicare;
- The date the individual is covered under any group health plan not maintained by the employer, even if that coverage is less valuable;
- The date the employer ceases to maintain any group health plans;
- For the spouse, the date five years after the former employee's employment ended; or
- The date the former employer terminates its group contract
with the insurer or HMO, in which case the insurer or HMO
must notify the individual of the right to convert to an
individual policy.
- Coverage may also be terminated for failure to remit premium
on time.
(Note that the COBRA Regulations require that if a payment is made and it is short by an insignificant amount (undefined), the plan must treat the payment as payment in full or it must notify the qualified beneficiary of the amount of the deficiency and grant a reasonable period of time (safe harbor: 30 days) for the deficiency to be paid.)
- Track the age of COBRA continuees, as they typically become
Medicare eligible at age 65.
- Conduct periodic (monthly) reviews of the COBRA billing and
COBRA log to ensure compliance with the regulations.
- Provide a notification of the employee's COBRA coverage
expiration and his/her right to convert health coverage to a
private plan, within 180 days prior to the employee's COBRA
coverage expiration (see the sample
notification letter).
- Provide the Certificate of Group Health Coverage form when the COBRA coverage ends.
Process Tips:
If a qualified beneficiary participates in a region-specific benefit plan that will not service her or his health needs in the area to which she or he is relocating (regardless of the reason for the relocation), the qualified beneficiary must be given an opportunity to elect alternative coverage that the employer or employee organization makes available to active employees. If the employer or employee organization makes group health plan coverage available to non-COBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating, then that coverage is the alternative coverage that must be made available to the relocating qualified beneficiary.
If a provider of health care (such as a physician, hospital, or pharmacy) contacts the plan to confirm coverage of a qualified beneficiary during the election period (before the beneficiary has elected COBRA coverage), the plan must give a complete response to the health care provider about the qualified beneficiary's COBRA continuation coverage rights during the election period. For example, if the plan provides coverage during the election period but cancels coverage retroactively if COBRA continuation coverage is not elected, then the plan must inform a provider that a qualified beneficiary for whom coverage has not been elected is covered but that the coverage is subject to retroactive termination. Similarly, if the plan cancels coverage but then retroactively reinstates it once COBRA continuation coverage is elected, then the plan must inform the provider that the qualified beneficiary currently does not have coverage but will have coverage retroactively to the date coverage was lost if COBRA continuation coverage is elected.
This is a highly regulated area of employment. Ensure that you follow the letter of the law and administer the plan consistently. If, for example, you extend a premium payment deadline for one employee, you must do the same for all employees.
Since many Human Resources departments are not typically trained in administering Accounts Payable, it may be appropriate to consider that accounting or an outside administrator handle the billing and receiving part of the program.
How HRSource™ Can Help:
HRSource™ helps administer COBRA:
- Generate COBRA election forms, premium due and premium late
notices, COBRA log, ineligibility letter, can cancellation of
coverage letter.
- Issue information to COBRA Third Party Administrators of employee qualifying events.
- Link to the COBRA Initial Notification and General Notification documents
- Generate the Certificate of Group Health Coverage form
