Since the passage of the Affordable Care Act (ACA), we’ve seen a whirlwind of change in the health care and health insurance landscape here in the U.S., ushering in a whole new era of options and regulatory issues for both employers and employees.
Along the way, there have been rumors that COBRA continuation coverage would no longer be relevant or needed. You remember COBRA, don’t you? That’s the Consolidated Omnibus Budget Reconciliation Act of 1986. While it may seem like the forgotten stepchild since the ACA came on the scene, this federal program is still very much alive and well. And when Medicare or Marketplace plans aren’t a good fit, COBRA can be a vital lifeline. It allows employees who are in the midst of a treatment or deductible cycle to keep their provider networks, maintain their same deductibles and, in most cases, secure coverage that’s retroactive to the original date of coverage loss. These are all advantages that the Marketplace can’t always provide.
COBRA: A refresher
COBRA requires employers with group health plans and more than 20 employees to offer a temporary continuation of group health coverage to covered employees, their spouses and dependent children that otherwise might be terminated due to certain qualifying events, including:
- Termination of employment (other than for gross misconduct)
- Reduction in hours
- Death of a covered employee
- Divorce or legal separation from an employee
- Eligibility for Medicare
What if you have less than 20 employees?
Many states, including Texas, require employers with less than 20 employees to offer something similar to COBRA, often called “State Continuation.” Texas also requires employers with more than 20 employees to offer an additional extension of coverage after a former beneficiary’s COBRA coverage ends.
What benefits must be offered?
The benefits offered to a COBRA participant have to be the same benefits he or she was receiving as an active employee. COBRA benefits also must be the same group benefits offered to the group of similarly situated active employees, so if the rates or plans change, COBRA participants must be allowed to make comparable changes. Additionally, most employers are not aware that COBRA also applies to Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs).
How long does COBRA coverage last?
COBRA requires initial coverage to last for 18 months, and certain circumstances allow plan participants to extend the coverage period to either 29 months due to a disability, or up to 36 months if a second qualifying event occurs.
In Texas, State Continuation may add an additional six months on top of these time frames.
What do employers have to do?
If the health plan you offer is subject to COBRA, your first priority is to make sure you have the policies and procedures in place to administer the program properly. COBRA administration is notoriously time consuming, so you need to do it right or outsource to a reputable third party administrator. Penalties for getting it wrong can add up quickly. There are also notice requirements, including:
- General Rights Notice: When an employee initially enrolls in your company’s benefits plan, you have to provide this notice, which informs the employee of his or her COBRA rights should they ever terminate from the plan.
- Qualifying Event Notice: When an employee terminates from your company benefits plan, you’re required to provide this notice, which reminds the employee of his or her right to continue group benefits coverage under COBRA.
To learn more about COBRA, visit the Department of Labor’s Employer FAQ on COBRA Continuation Health Coverage. Need help with your COBRA administration? Talk to the COBRA administration experts at Higginbotham.