Type of law: COBRA is a federal law.
Who’s affected: Employers who offer group medical coverage.
What it does: At the time of termination, or under certain other circumstances, an employee may be eligible for the continuation of health care benefits as recognized under federal law, referred to as COBRA. Under federal law an employer must normally employ more than 20 employees (both full-time and part-time employees count) to be subject to COBRA requirements. Under federal law, an employee has 60 days after notification of their COBRA rights to sign up.
The longest possible period during which COBRA continuation coverage must be provided is referred to as the maximum coverage period. There are three maximum coverage periods, as described below:
- 36 Months: Continued health care coverage must be offered for a period of 36 months for covered spouses or dependent children of an employee in the case of:
- The death of the covered employee;
- Divorce or separation of the covered employee and spouse;
- The covered employee becoming eligible for Medicare; or
- A covered dependent child ceasing to be a dependent child under the provisions of the plan (for example, when a child attains majority age).
- 18 Months: Continued health care coverage must be offered to the covered employee, spouse and dependent children for a period of 18 months when:
- The covered employee is terminated (for reasons other than the employee’s gross misconduct); or
- The covered employee suffers a loss of coverage under the employer’s group health plan because of a reduction in hours worked.
- 18 to 29 Months: COBRA benefits may be extended from 18 to 29 months for qualified beneficiaries who are totally disabled within the meaning of the Social Security Act at the time of the qualifying event (i.e., termination of employment or reduction in hours) or who become disabled within 60 days after COBRA coverage begins. For qualified beneficiaries who are disabled at the time of the qualifying event, extended coverage will terminate the month that begins 30 days after the date of final determination that the qualified beneficiary is no longer disabled, or after 29 months of coverage, if that occurs first.
Events that limit the duration of coverage: COBRA continuation coverage terminates when the qualified beneficiary becomes covered under another group health plan as a result of employment, reemployment or remarriage, so long as the other plan does not exclude a preexisting condition of the beneficiary. (In 2014 under the Affordable Care Act, preexisting condition exclusions will no longer apply.) In addition, no continuation coverage need be provided after:
- Failure to make timely premium payments under the plan;
- The qualified beneficiary enrolls in Medicare after electing COBRA; or
- The employer ceases to maintain any group health plan.
Premium charged for continuation coverage: The plan may require payment of a premium for continuation coverage. However, the premium may not exceed 102% for COBRA coverage of the applicable premium that would have been paid by the employer and the employee had the qualifying event not occurred. Note, however, that for employees entitled to a disability extension of the maximum coverage period, an employer may charge a premium of up to 150 percent of the applicable premium.
What you need to do: Employers must offer continuation coverage with benefits that are identical to the coverage provided under the plan to similarly situated beneficiaries who are still participants in the plan. A group health plan is required to provide an initial COBRA notice to each covered employee and spouse upon their first becoming covered by the group health plan. Within 30 days of the date on which a covered employee dies, is terminated from employment, has a reduction in hours, or becomes entitled to benefits under Medicare, the employer must notify the plan administrator, and, within 14 days, the administrator must inform the qualified beneficiaries of their rights to continuation coverage and provide a COBRA election form. Each qualified beneficiary has 60 days after the notice is received to elect COBRA coverage.
Similarly, a covered employee, spouse or dependent must notify the plan administrator in the event of divorce or legal separation, or of a dependent child ceasing to be a dependent child under the plan, within 60 days. After notice of the divorce, legal separation, or loss of dependent status by a child, the plan administrator, in turn, must within 14 days notify the qualified beneficiaries of the right to elect continuation coverage. In addition, qualified beneficiaries who are disabled at the time of the qualifying event must notify the plan administrator of the disability (within 60 days of the date of the Social Security Administration’s determination of the disability); and when the beneficiary is no longer disabled (within 30 days after final determination of the nondisability).
Health Insurance Portability and Accountability Act (HIPAA)
Type of law: Federal and state.
Who’s affected: Federal law governs employers with two or more employees.
What it does: HIPAA allows employees to obtain health insurance when they lose their group health insurance or change their job, even if they have a preexisting health condition. If an employee qualifies, he cannot be denied insurance because of his medical history.
What you need to do: If your medical plan has a preexisting condition clause, make sure new employees provide evidence of creditable coverage, also known as a HIPAA certificate. Evidence of creditable coverage is generally a letter that describes how long the employee has been previously covered. You will need to notify the new participant of the length of any applicable preexisting condition exclusion after creditable coverage is taken into account. (In 2014 under Affordable Care, insurers will no longer be able to deny coverage to an individual based on a preexisting condition, health status, or claims history.) When coverage ends for an employee or family member, the insurer must send a HIPAA certificate to the former participant.