Colorado Cobra Insurance

The Consolidated Omnibus Reconciliation Act of 1985 (COBRA) allows employees and their covered dependents to continue group health coverage under certain circumstances.

As of January 1, 2009, the State is using a COBRA third-party administrator (TPA).   The TPA is responsible for sending COBRA notices, managing COBRA enrollment, billing and answering enrollment, payment and cancellation questions from COBRA enrollees.

Contact the COBRA Third-Party Administrator (TPA) at:

Phone – 1.877.725.4545 / Fax – 515-273-1545

Note:  Your COBRA coverage will become effective once your first premium is received by the COBRA TPA.  Coverage is retroactive once payment is received.

AN EMPLOYEE’S

GUIDE TO

HEALTH BENEFITS

UNDER COBRA

The Consolidated Omnibus

Budget Reconciliation Act

U.S. Department of Labor

Employee Benefits Security Administration

Revised September 2010

CONTENTS

INTRODUCTION…………………………………………………………….1

WHAT IS COBRA CONTINUATION COVERAGE?……………….2

WHO IS ENTITLED TO CONTINUATION COVERAGE?……….5

YOUR COBRA RIGHTS AND RESPONSIBILITIES:

NOTICE AND ELECTION PROCEDURES………………………….7

BENEFITS UNDER CONTINUATION COVERAGE…………….12 ..

DURATION OF CONTINUATION COVERAGE…………………..13.

CHART: SUMMARY OF QUALIFYING EVENTS,

QUALIFIED BENEFICIARIES, AND MAXIMUM

PERIODS OF CONTINUATION COVERAGE…………………….17

PAYING FOR CONTINUATION COVERAGE……………………..18.

HEALTH COVERAGE TAX CREDIT………………………………….20

COORDINATION WITH OTHER FEDERAL

BENEFIT LAWS……………………………………………………………22

ROLE OF THE FEDERAL GOVERNMENT………………………..24

RESOURCES……………………………………………………………….25

Introduction

Health insurance programs help workers and their families take care of

their essential medical needs. These programs can be one of the most

important benefits provided by an employer.

There was a time when employer-provided group health coverage was

at risk if an employee was fired, changed jobs, or got divorced. That

substantially changed in 1986 with the passage of the health benefit

provisions in the Consolidated Omnibus Budget Reconciliation Act

(COBRA). Now, many employees and their families who would

lose group health coverage because of serious life events are able to

continue their coverage under the employer’s group health plan, at least

for limited periods 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 is designed to:

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.

What Is COBRA Continuation Coverage?

The Consolidated Omnibus Budget Reconciliation Act (COBRA)

requires most group health plans to provide a temporary continuation of

group health coverage that otherwise might be terminated.

COBRA requires continuation coverage to be offered to covered

employees, their spouses, their former spouses, and their dependent

children when group health coverage would otherwise be lost due

to certain specific events. Those events include the death of a

covered employee, termination or reduction in the hours of a covered

employee’s employment for reasons other than gross misconduct,

divorce or legal separation from a covered employee, a covered

employee’s becoming 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 percent administrative

charge. The required payment for continuation coverage is often more

expensive than the amount that active employees are required to pay

for group health coverage, since the employer usually pays part of the

cost of employees’ coverage and all of that cost can be charged to the

individuals receiving continuation coverage. The COBRA payment

is ordinarily less expensive, though, than individual health coverage.

While COBRA continuation coverage must be offered, it lasts only

for a limited period of time. This booklet will discuss all of these

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 by churches and certain

church-related organizations.

Under COBRA, a group health plan is any arrangement that an

employer establishes or maintains to provide employees or their

families with medical care, whether it is provided through insurance,

by a health maintenance organization, out of the employer’s assets on

a pay-as-you-go basis, or otherwise. “Medical care” for this 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; and COBRA does not cover plans that provide only life

insurance or disability benefits.

Group health plans covered by COBRA that are sponsored by privatesector

employers generally are governed by ERISA. ERISA does not

require employers to establish plans or to provide any particular type

or level of benefits, but it does require plans to comply with ERISA’s

rules. ERISA gives participants and beneficiaries rights that are

enforceable in court.

Alternatives to COBRA Continuation Coverage

If you become entitled to elect COBRA continuation coverage when

you otherwise would lose group health coverage under a group health

plan, you should consider all options you may have to get other health

coverage before you make your decision. One option may be “special

enrollment” into other group health coverage.

Under the Health Insurance Portability and Accountability Act

(HIPAA), if you or your dependents are losing eligibility for group

health coverage, including eligibility for continuation coverage, you

may have a right to special enroll (enroll without waiting until the

next open season for enrollment) in other group health coverage. For

example, an employee losing eligibility for group health coverage

may be able to special enroll in a spouse’s plan. A dependent losing

4

eligibility for group health coverage may be able to enroll in a different

parent’s group health plan. To have a special enrollment opportunity,

you or your dependent must have had other health coverage when you

previously declined coverage in the plan in which you now want to

enroll. To special enroll, you or your dependent must request special

enrollment within 30 days of the loss of other coverage.

If you or your dependent chooses to elect COBRA continuation

coverage instead of special enrollment, you will have another

opportunity to request special enrollment once you have exhausted

your continuation coverage. In order to exhaust COBRA continuation

coverage, you or your dependent must receive the maximum period of

continuation coverage available without early termination. You must

request special enrollment within 30 days of the loss of continuation

coverage.

Another option may be to buy an individual health insurance policy.

HIPAA gives individuals who are losing group health coverage and

who have at least 18 months of creditable coverage without a break

in coverage of 63 days or more the right to buy individual health

insurance coverage that does not impose a preexisting condition

exclusion period. For this purpose, most health coverage, including

COBRA continuation coverage, is creditable coverage. These special

rights may not be available to you if you do not elect and receive

continuation coverage. For more information on your right to buy

individual health insurance coverage, contact your state department of

insurance.

In addition, individuals in a family may be eligible for health insurance

coverage through various government programs, such as Pre-Existing

Condition Insurance Plans and the Children’s Health Insurance

Program. For more information, visit http://www.healthcare.gov/law/

provisions/preexisting/index.html and www.insurekidsnow.gov or

contact your state department of insurance

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; and You must be a qualified beneficiary for that event.

Plan Coverage

COBRA covers group health plans sponsored by an employer (privatesector

or state/local government) that employed at least 20 employees

on more than 50 percent of its typical business days in the previous

calendar year. Both full- and part-time employees are counted to

determine whether a plan is subject to COBRA. Each part-time

employee counts as a fraction of a full-time employee, with the fraction

equal to the number of hours that the part-time employee worked

divided by the hours 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 qualifying event determines

who the qualified beneficiaries are for that event and the period of time

that a plan must offer continuation coverage. COBRA establishes only

the minimum requirements for continuation coverage. A plan may

always choose to provide 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”; or Reduction 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 or dependent

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; or  Death 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 the child to lose coverage:

Loss of “dependent child” status under the plan rules.

Qualified Beneficiaries

A qualified beneficiary is an individual who was covered by a group

health plan on the day before a qualifying event occurred that caused

him or her to lose coverage. Only certain individuals can become

qualified beneficiaries due to a qualifying event, and the type of

qualifying event determines who can become a qualified beneficiary

when it happens. (See “Qualifying Events” earlier in this booklet.)

A qualified beneficiary must be a covered employee, the employee’s

spouse or former spouse, or the employee’s dependent child. In certain

cases involving the bankruptcy of the employer sponsoring the plan,

a retired employee, the retired employee’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 coverage is

automatically considered a qualified beneficiary. Agents, independent

contractors, and directors who participate in the group health plan may

also be qualified beneficiaries.
Your COBRA Rights and Responsibilities:
Notice and Election Procedures
Under COBRA, group health plans must provide covered employees
and their families with certain notices explaining their COBRA rights.
They must also have rules for how COBRA continuation coverage is
offered, how qualified beneficiaries may elect continuation coverage,
and when it can be terminated.
Notice Procedures

Summary Plan Description

The COBRA rights provided under the plan must be described in

the plan’s summary plan description (SPD). The SPD is a written

document that gives important information about the plan, including

what benefits are available under the plan, the rights of participants and

beneficiaries under the plan, and how the plan works. ERISA requires

group health plans to give you an SPD within 90 days after you first

become a participant in a plan (or within 120 days after the plan is

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 year in which the changes become

effective; if the change is a material reduction in covered services or

benefits, the SMM must be furnished not later than 60 days after the

reduction is adopted. A participant or beneficiary covered under the

plan may request a copy of the SPD and any SMMs (as well as any

other plan documents), which must be provided within 30 days of a

written request.

COBRA General Notice

Group health plans must give each employee and each spouse who
becomes covered under the plan a general notice describing COBRA
rights. The general notice must be provided within the first 90 days of
coverage. Group health plans can satisfy this requirement by giving
you the plan’s SPD within this time period, as long as it contains the
general notice information. The general notice should contain the
information that you need to know in order to protect your COBRA
rights when you first become covered under the plan, including the

name of the plan and someone you can contact for more information,

a general description of the continuation coverage provided under

the plan, and an explanation of any notices you must give the plan to

protect your COBRA rights.

COBRA Qualifying Event Notices

Before a group health plan must offer continuation coverage, a

qualifying event must occur, and the group health plan must be 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;

Covered employee’s becoming entitled to Medicare; or

Bankruptcy of the employer.

The employer has 30 days after the event occurs to provide notice to

the plan.

You (the covered employee or one of the qualified beneficiaries) must notify the plan if the qualifying event is:

• Divorce;

• Legal separation; or

• A 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 must have procedures

for how to give notice of the qualifying event, and the procedures

should be described in both the general notice and the plan’s SPD. The

plan can set a time limit for providing this notice, but the time limit

cannot be shorter than 60 days, starting from the latest of:

(1) the date on which the qualifying event occurs; (2) the date on which

you lose (or would lose) coverage under the plan as a result of the

qualifying event; or (3) the date on which you are 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.

If your plan does not have reasonable procedures for how to give notice

of a qualifying event, you can give notice by contacting 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 the benefits are provided through insurance), notice can be given to

the insurance company.

COBRA Election Notice

When 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 to the qualified beneficiaries within 14 days

after the plan administrator receives the notice of a qualifying event.

The election notice should contain all of the information you will need

to understand continuation coverage and make an informed decision

whether or not to elect continuation coverage. It should also give you

the name of the plan’s COBRA administrator and tell you how to get

more information.

COBRA Notice of Unavailability of Continuation Coverage

Group 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 and the

plan determines that you or your family member is not entitled to the

requested continuation coverage for any reason, the plan must give

the person who requested it a notice of unavailability of continuation

coverage. The notice must be provided within 14 days after the request

is received, and the notice must explain the reason for denying the

request.

COBRA Notice of Early Termination of Continuation Coverage

Continuation coverage must generally be made available for a

maximum period (18, 29, or 36 months). The group health plan may

terminate continuation coverage earlier, however, for any number

of specific reasons. (See “Duration of Continuation Coverage” later

in this booklet). When a group health plan decides to terminate

continuation coverage early for any of these reasons, the plan must give

the qualified beneficiary a notice of early termination. The notice must

be given as soon as practicable after the decision is made, and it must

describe the date coverage will terminate, the reason for termination,

and any rights the qualified beneficiary may have under the plan or

applicable law to elect alternative group or individual coverage, such as

a right to convert to an individual policy.

Special Rules for Multiemployer Plans

Multiemployer plans are allowed to adopt some special rules for

COBRA notices. First, a multiemployer plan may adopt its own

uniform time limits for the qualifying event notice or the election

notice. A multiemployer plan also may choose not to require employers

to provide qualifying event notices, and instead to have the plan

administrator determine when a qualifying event has occurred.

Any special multiemployer plan rules must be set out in the plan’s

documents (and SPD).

Election Procedures

If you become entitled to elect COBRA continuation coverage, you

must be given an election period of at least 60 days (starting on the

later of the date you are furnished the election notice or the date you

would lose coverage) to choose whether or not to elect continuation

coverage.

Each of the qualified beneficiaries for a qualifying event may

independently elect continuation coverage. This means that if both you

and your spouse are entitled to elect continuation coverage, you each

may decide separately whether to do so. The covered employee or the

spouse must be allowed, however, to elect on behalf of any dependent

children or on behalf of all of the qualified beneficiaries. A parent or

legal guardian may elect on behalf of a minor child.

If you waive continuation coverage during the election period, you

must be permitted later to revoke your waiver of coverage and to elect

continuation coverage as long as you do so during the election period.

Under those circumstances, the plan need only provide continuation

coverage beginning on the date you revoke the waiver.

The Trade Adjustment Assistance Act of 2002 amended COBRA

to provide certain workers who lose their jobs due to the effects of

international trade and who qualify for trade adjustment assistance

(TAA) with a  second opportunity to elect COBRA continuation

coverage. For more information about the operation and scope of the

second COBRA election opportunity created by the Trade Act, call the

HCTC Customer Contact Center at 1-866-628-HCTC (4282) (TDD/

TTY: 1-866-626-HCTC (4282)). You may also visit the HCTC Program

Web site at www.irs.gov by entering the keyword: “HCTC.”

Benefits Under Continuation Coverage

If you elect continuation coverage, the coverage you are given must be

identical to the coverage that is currently available under the plan to

similarly situated active employees and their families (generally, this

is the same coverage that you had immediately before the qualifying

event). You will also be entitled, while receiving continuation

coverage, to the same benefits, choices, and services that a similarly

situated participant or beneficiary is currently receiving under the plan,

such as the right during an open enrollment season to choose among

available coverage options. You will also be subject to the same

rules and limits that would apply to a similarly situated participant

or beneficiary, such as co-payment requirements, deductibles, and

coverage limits. The plan’s rules for filing benefit claims and appealing

any claims denials also apply.

Any changes made to the plan’s terms that apply to similarly situated

active employees and their families will also apply to qualified

beneficiaries receiving COBRA continuation coverage. If a child

is born to or adopted by a covered employee during a period of

continuation coverage, the child is automatically considered to be a

qualified beneficiary receiving continuation coverage. You should

consult your plan for the rules that apply for adding your child to

continuation coverage under those circumstances.

Duration of Continuation Coverage

Maximum Periods

COBRA requires that continuation coverage extend from the date of

the qualifying event for a limited period of time of 18 or 36 months.

The length of time for which continuation coverage must be made

available (the “maximum period” of continuation coverage) depends

on the type of qualifying event that gave rise to the COBRA rights. A

plan, however, may provide longer periods of coverage beyond the

maximum period required by law.

When the qualifying event is the covered employee’s termination

of employment or reduction in hours of employment, qualified

beneficiaries are entitled to a maximum of

18 months of continuation coverage.

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 8 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 8 months).

For all other qualifying events, qualified beneficiaries are entitled to a

maximum of 36 months of continuation coverage.1    

1  Under COBRA, certain retirees and their family members who receive post-retirement

health coverage from employers have special COBRA rights in the event that the

employer is involved in bankruptcy proceedings begun on or after July 1, 1986. This

booklet does not fully describe the COBRA rights of that group.

 

Early Termination

A group health plan may terminate continuation coverage earlier than

the end of the maximum period for any of the following reasons:

Premiums are not paid in full on a timely basis;

 the employer ceases to maintain any group health plan;

 A qualified beneficiary begins coverage under another group health plan after electing continuation coverage, as long as that plan doesn’t impose an exclusion or limitation affecting a preexisting condition of the qualified beneficiary;

 A qualified beneficiary becomes entitled to Medicare benefits after electing continuation coverage; or

A qualified beneficiary engages in conduct that would justify the

plan in terminating coverage of a similarly situated participant or

beneficiary not receiving continuation coverage (such as fraud).

If continuation coverage is terminated early, the plan must provide

the qualified beneficiary with an early termination notice. (See “Your

COBRA Rights and Responsibilities” earlier in this booklet.)

Extension of an 18-month Period of Continuation Coverage

If you are entitled to an 18-month maximum period of continuation

coverage, you may become eligible for an extension of the maximum

time period in two circumstances. The first is when a qualified

beneficiary (either you or a family member) is disabled; the second is

when a second qualifying event occurs.

Disability  

If any one of the qualified beneficiaries in your family is disabled and

meets certain requirements, all of the qualified beneficiaries receiving

continuation coverage due to a single qualifying event 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, first, that the disabled qualified beneficiary

must be determined by the Social Security Administration (SSA) to

be disabled at some time before the 60th day of continuation coverage

and, second, that the disability must continue during the rest of the

18-month period of continuation coverage.

The disabled qualified beneficiary or another person on his or her

behalf must also 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: (1) the

date on which SSA issues the disability determination; (2) the date on

which the qualifying event occurs; (3) the date on which the qualified

beneficiary loses (or would lose) coverage under the plan as a result of

the qualifying event; or (4) the date on which the qualified beneficiary

is informed, through the furnishing of 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 the SSA

determines that the disabled qualified beneficiary is no longer disabled.

The plan can require qualified beneficiaries receiving the disability

extension to notify it if the SSA makes such a determination, although

the plan must give the qualified beneficiaries at least 30 days after the

SSA determination to do so.

The rules for how to give a disability notice and a notice of no longer

being disabled should be described in the plan’s SPD (and in the

election notice if you are offered an 18-month maximum period of

continuation coverage).

Second Qualifying Event

If you are receiving an 18-month maximum period of continuation

coverage, you may become entitled to an 18-month extension (giving

a total maximum period of 36 months of continuation coverage) if

you experience a second qualifying event that is the death of a covered

employee, the divorce or legal separation of a covered employee and

spouse, a covered employee’s becoming entitled to Medicare, or a

loss of dependent child status under the plan. The second event can

be a second qualifying event only if it would have caused you to lose

coverage under the plan in the absence of the first qualifying event. If a

second qualifying event occurs, you will need to notify the plan.

The rules for how to give notice of a second qualifying event should

be described in the plan’s SPD (and in the election notice if you are

offered an 18-month maximum period of continuation coverage). The

plan can set a time limit for providing this notice, but the time limit

cannot be shorter than 60 days from the latest of: (1) the date on which

the qualifying event occurs; (2) the date on which you lose (or would

lose) coverage under the plan as a result of the qualifying event; or (3)

the date on which you are 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.

Conversion Options

If your group health plan gives participants and beneficiaries whose

coverage under the plan terminates the option to convert from group

health coverage to an individual policy, the plan must give you the

same option when your maximum period of continuation coverage

ends. The conversion option must be offered not later than 180

days before your continuation coverage ends. The premium for an

individual conversion policy may be more expensive than the premium

of a group plan, and the conversion policy may provide a lower level

of coverage. You are not entitled to the conversion option, however,

if your continuation coverage is terminated before the end of the

maximum period for which it was made available.

SUMMARY OF QUALIFYING EVENTS, QUALIFIED

BENEFICIARIES, AND MAXIMUM PERIODS OF

CONTINUATION COVERAGE

The following chart shows the specific qualifying events, the qualified

beneficiaries who are entitled to elect continuation coverage, and the

maximum period of continuation coverage that must be offered, based

on the type of qualifying event.

Note that an event is a qualifying event only if it would cause the qualified beneficiary to lose coverage under the plan.

QUALIFYING

EVENT

QUALIFIED

BENEFICIARIES

MAXIMUM PERIOD

OF CONTINUATION

COVERAGE

Termination (for

reasons other than

gross misconduct) or

reduction in hours of

employment

Employee

Spouse

Dependent Child

18 months2

Employee enrollment

in Medicare

Spouse

Dependent   Child

36   months

Divorce

or legal separation

Spouse

Dependent Child

36 months

Death of employee

Spouse

Dependent   Child

36   months

Loss of “dependent

child” status under

the plan

Dependent Child

36 months

In certain circumstances, qualified beneficiaries entitled to 18 months of continuation

coverage may become entitled to a disability extension of an additional 11 months

(for a total maximum of 29 months) or an extension of an additional 18 months due to

the occurrence of a second qualifying event (for a total maximum of 36 months). (See

“Duration of Continuation Coverage” earlier in this booklet.)

 

Paying for Continuation Coverage

Your group health plan can require you to pay for COBRA continuation

coverage. The amount charged to qualified beneficiaries cannot exceed

102 percent of the cost to the plan for similarly situated individuals

covered under the plan who have not incurred a qualifying event. In

determining COBRA premiums, the plan can include the costs paid

by employees and the employer, plus an additional 2 percent for

administrative costs. For qualified beneficiaries receiving the 11-month disability extension,

the COBRA premium for those additional months may be increased to

150 percent of the plan’s total cost of coverage for similarly situated

individuals.

COBRA charges to qualified beneficiaries may be increased if the

cost to the plan increases but generally must be fixed in advance of

each 12-month premium cycle. The plan must allow you to pay the

required premiums on a monthly basis if you ask to do so, and the

plan may allow you to make payments at other intervals (for example,

weekly or quarterly). The election notice should contain all of the

information you need to understand the COBRA premiums you will

have to pay, when they are due, and the consequences of late payment

or nonpayment.

When you elect continuation coverage, you cannot be required to send

any payment with your election form. You can be required, however,

to make an initial premium payment within 45 days after the date of

your COBRA election (that is the date you mail in your election form,

if you use first-class mail). Failure to make any payment within that

period of time could cause you to lose all COBRA rights. The plan

can set premium due dates for successive periods of coverage (after

your initial payment), but it must give you the option to make monthly

payments, and it must give you a 30-day grace period for payment of

any premium.

You should be aware that if you do not pay a premium by the first day

of a period of coverage, but pay the premium within the grace period 19 for that period of coverage, the plan has the option to cancel your

coverage until payment is received and then reinstate the coverage

retroactively back to the beginning of the period of coverage. Failure

to make payment in full before the end of a grace period could cause

you to lose all COBRA rights.

If the amount of a payment made to the plan is wrong, but is not

significantly less than the amount due, the plan is required to notify

you of the deficiency and grant a reasonable period (for this purpose,

30 days is considered reasonable) to pay the difference. The plan is not

obligated to send monthly premium notices.

Health Coverage Tax Credit

Certain individuals may be eligible for a Federal income tax credit

that can alleviate the financial burden of monthly COBRA premium

payments. The Trade Adjustment Assistance Act of 2002 (Trade

Act of 2002) created the Health Coverage Tax Credit (HCTC), an

advanceable, refundable tax credit for up to 65 percent of the premiums

paid for specified types of health insurance coverage (including

COBRA continuation coverage). The HCTC is available to certain

workers who lose their jobs due to the effects of international trade and

who qualify for trade adjustment assistance (TAA), as well as to certain

individuals who are receiving pension payments from the Pension

Benefit Guaranty Corporation (PBGC). Individuals who are eligible

for the HCTC may choose to have the amount of the credit paid on a

monthly basis to their health coverage provider as it becomes due, or

may claim the tax credit on their income tax returns at the end of the

year.

The Trade Adjustment Assistance Health Coverage Improvement Act of

2009, enacted as part of the American Recovery and Reinvestment Act

(ARRA), made changes to the HCTC.

The HCTC now pays a greater portion of your health insurance. The tax

credit increased to 80 percent of qualified health insurance premiums.

Newly-enrolled participants can request to receive a reimbursement

or a credit on their HCTC account for qualified payments made while

enrolling in the HCTC Program.

The HCTC is available to your family members for a longer period of

time beginning in January 2010. Your family may continue receiving

the HCTC for up to 24 months after you, the primary eligible

individual, enroll in Medicare, get divorced or die.

COBRA coverage also is temporarily extended for HCTC-eligible

individuals. TAA-eligible individuals can keep COBRA coverage as

long as they continue to be TAA-eligible.

 

PBGC-eligible individuals may be able to retain their COBRA

coverage until death. The PBGC-eligible individual’s spouse and

dependents can keep the coverage for an additional 24 months beyond

that. However, note that this provision, like the rest of the Trade

Adjustment Assistance Health Coverage Improvement Act, expires on

December 31, 2010. At the time of this printing, these changes to the

HCTC – including the new timeframes for extended benefits – are only

valid through December 31, 2010.

Electing the COBRA premium reduction under ARRA disqualifies

you for the HCTC. If you are eligible for the HCTC, which could be

more valuable than the premium reduction, you will have received a

notification from the IRS. If you are already receiving the COBRA

premium reduction and wish to receive the HCTC, you can switch

by opting out of the COBRA premium reduction program prior to

registering for the HCTC program. You cannot receive the COBRA

premium reduction and the HCTC in the same month.

For more information about the Health Coverage Tax Credit, call the

HCTC Customer Contact Center at 1-866-628-HCTC (4282) (TDD/

TTY: 1-866-626-HCTC (4282)). You may also visit the HCTC program

Web site at www.irs.gov by entering the keyword: “HCTC.”

COORDINATION WITH OTHER FEDERAL BENEFIT LAWS

The Family and Medical Leave Act (FMLA) requires an employer

to maintain coverage under any “group health plan” for an employee

on FMLA leave under the same conditions coverage would have

been provided if the employee had continued working. Group health

coverage that is provided under the FMLA during a family or medical

leave is NOT COBRA continuation coverage, and taking FMLA leave

is not a qualifying event under COBRA. A COBRA qualifying event

may occur, however, when an employer’s obligation to maintain health

benefits under FMLA ceases, such as when an employee taking FMLA

leave decides not to return to work and notifies an employer of his or

her intent not to return to work.

In considering whether to elect continuation coverage, you should take

into account that maintaining group health coverage affects your future

rights to protections provided under HIPAA. HIPAA limits the length

of any preexisting condition exclusion that a group health plan may

impose and generally requires any exclusion period to be reduced by

an individual’s number of days of creditable coverage that occurred

without a break in coverage of 63 days or more. For this purpose, most

health coverage, including COBRA coverage, is creditable coverage.

Electing COBRA may help you avoid a 63-day break in coverage

and, therefore, help you eliminate or shorten any future preexisting

condition exclusion period that may be applied by a future group health

plan, health insurance company, or HMO.

HIPAA also provides special enrollment rights upon the loss of group

health plan coverage and rights to buy individual coverage that does not

impose a preexisting condition exclusion period as described earlier in

this book (See “Alternatives to COBRA Continuation Coverage”).

To take advantage of some of HIPAA’s protections, individuals

must show evidence of prior creditable coverage. The primary

way individuals can evidence prior creditable coverage to reduce

a preexisting condition exclusion period (or to gain other access to

individual health coverage) is with a certificate of creditable coverage.

HIPAA requires group health plans, health insurance companies, and

23

HMOs to furnish a certificate of creditable coverage to an individual

upon cessation of coverage. A certificate of creditable coverage must

be provided automatically to individuals entitled to elect COBRA

continuation coverage no later than when a notice is required to be

provided for a qualifying event under COBRA, and to individuals who

elected COBRA coverage, either within a reasonable time after learning

that the COBRA coverage has ceased or within a reasonable time after

the end of the grace period for payment of COBRA premiums. If you

do not receive or you lose your certificate and cannot obtain another,

you can still show prior coverage using other evidence of prior health

coverage (for example, pay stubs, copies of premium payments, or

other evidence of health care coverage). For more information about

evidencing prior health coverage or your rights under HIPAA, contact

EBSA toll free at 1-866-444-3272.

The Affordable Care Act (ACA) provides additional health protections.

Except for references to the PCIPs, this publication does not reflect the

Affordable Care Act. For more information, visit the Department of

Labor’s Web page at www.dol.gov/ebsa/healthreform/. Also visit the

Department of Health and Human Services (HHS) Web site at

www.healthcare.gov.

 

ROLE OF THE FEDERAL GOVERNMENT

COBRA continuation coverage laws are administered by several

agencies. The Departments of Labor and the Treasury have jurisdiction

over private-sector group health plans. The Department of Health and

Human Services administers the continuation coverage law as it affects

public-sector health plans.

The Labor Department’s interpretive responsibility for COBRA is

limited to the disclosure and notification requirements of COBRA.

The Labor Department has issued regulations on the COBRA notice

provisions. The Treasury Department has interpretive responsibility

to define the required continuation coverage. The Internal Revenue

Service, Department of the Treasury, has issued regulations on

COBRA provisions relating to eligibility, coverage, and payment.

The Departments of Labor and the Treasury share jurisdiction for

enforcement of these provisions.

RESOURCES

If you need further information about COBRA, ERISA, or HIPAA,

call toll free 1-866-444-3272 to reach the Employee Benefits Security

Administration regional office nearest you, or visit the agency’s Web

site at www.dol.gov/ebsa.

For information about the interaction of COBRA and HIPAA, visit the

EBSA Web site, go to “Publications and Reports” and click on

Your

Health Plan and HIPAA…Making the Law Work for You

The Centers for Medicare and Medicaid Services offer information

about COBRA provisions for public-sector employees. You can write

them at this address:

Centers for Medicare and Medicaid Services

7500 Security Boulevard

Mail Stop C1-22-06

Baltimore, MD 21244-1850

Federal employees are covered by a Federal law similar to COBRA.

Those employees should contact the personnel office serving their

agency for more information on temporary extensions of health

benefits.

Further information on FMLA is available from the nearest office of

the Wage and Hour Division, listed in most telephone directories under

U.S. Government, Department of Labor, or visit www.dol.gov/whd.

For questions about TAA, call the HCTC Customer Contact Center

at 1-866-628-HCTC (4282) (TDD/TTY: 1-866-626-HCTC (4282)).

You may also visit the HCTC Web site at www.irs.gov by entering the keyword “HCTC.”

 

.

U.S. Department of Labor

Employee Benefits Security Administration