COBRA & Mini-COBRA Laws: What you need to know.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives employees and their families the right to choose to continue their health care benefits for a limited time if their health care coverage is lost due to a qualifying event. These qualifying events include but are not limited to voluntary or involuntary job loss, reduction in the hours worked, a covered spouse’s divorce or legal separation from the employee, or a covered dependent’s change in status. Employers need to be sure that they are in compliance with COBRA regulations so they can avoid fines and penalties.
Who needs to provide COBRA coverage? Generally, private employers who offer a group health plan and have had at least 20 or more full-time equivalent employees are subject to COBRA.
Who is a qualified beneficiary? Any employee (and/or employee family member) who had coverage under the employer’s health care plan and was covered the day before the event that caused the loss of coverage needs to be offered COBRA. This includes retirees (unless they are eligible for Medicare). COBRA coverage does not have to be offered to an employee who was not yet eligible to participate in the group health plan, an employee who declined participation in the group health plan, or an employee who is enrolled for Medicare benefits.
Which benefits are covered? If you offer any of the following plans to your employees and they are participating in those plans, COBRA coverage must be offered:
Health care plans
Medical spending accounts
Dental and vision plans
Prescription and drug plans
Alcohol and substance abuse plans
Mental health plans
COBRA Notices and Election Procedures:
There are specific notices and disclosures regarding COBRA that must be provided to covered individuals and qualified beneficiaries explaining their rights.
Summary Plan Description: This written document provides plan information, including what benefits are available under the plan. ERISA requires that group health plans need to provide participants a summary plan description within 90 days of becoming a plan participant. If there are any material changes to the plan, participants must be notified by a Summary of Material Modifications no later than 210 days after the end of the plan year that the changes become effective. However, if the change is a reduction in covered services or benefits, this must be provided within 60 days.
COBRA General Notice: Group health plans are required to give each employee (and spouse, if applicable) a general notice detailing their COBRA rights within the first 90 days of coverage. The notice must include: The plan name and the name, address, and telephone number the employee can contact for more information, a description of the continuation coverage provided, an explanation of how qualified beneficiates can notify the plan of qualifying events, a disclaimer noting that the general notice does not fully describe COBRA, or the plan, and complete information is available from the plan administrator and can be found in the Summary Plan Description.
The Department of Labor has issued an updated version of a model general notice that employers can use to satisfy this requirement. If you are using an older version, you will want to update your records.
COBRA Qualifying Event Notice: The plan is not required to act until notice of a qualifying event is provided. The type of qualifying event will determine who sends the notice. Employers must notify the plan if the qualifying event is one of the following:
o Termination or reduction in hours
o Death of covered employee
o A covered employee is entitled to Medicare
o Employer bankruptcy.
Notification must occur within 30 days of the event.
COBRA Election Notice: When the plan receives notice of a qualifying event, qualified beneficiaries must be given an election notice within 14 days. This describes their rights and how they can elect to continue coverage. The notice must include:
o The name of the plan and the name, address, and telephone number for the plan’s COBRA administrator.
o Identification of the qualifying event and qualified beneficiaries.
o Explanation of the qualified beneficiaries’ right to choose continuation coverage.
o The date coverage will terminate or the date coverage has terminated if continuation coverage is not chosen.
o How to elect continuation coverage.
o What will occur if continuation coverage isn’t chosen or is waived.
o What continuation coverage is available, for how long, and, if it is under 36 months, how they can extend coverage due to disability or second qualifying event.
o The circumstances under which continuation coverage might end early.
o Premium payments requirements with due dates and grace periods.
As with the COBRA Model General Notice, the Department of Labor has updated the COBRA Model Election Notice. Both of these can be found here. These new versions have an expiration date of January 31, 2023.
Many states, including Pennsylvania, New Jersey, and New York, also have mini-COBRA laws. These were enacted to help extend health care options for employees of companies that employee less than 20 people. Here is an overview of those requirements.
Pennsylvania: Companies that have between 2-19 employees and offer those employees health insurance are eligible for state mini-COBRA benefits. One of the main differences between this and federal COBRA is that it allows eligible employees and dependents to purchase health insurance through their former employer for nine months after their employment ends due to a qualifying event. Also, there are no extensions available after nine months. The employer must provide notice to the employee of their rights under mini-COBRA within 30 days of a qualifying event. They must also provide notice to the plan administrator (if different than the employer), and the insurance company.
New Jersey: Employees that work for companies that have 2-50 workers and are participating in an employer-sponsored health insurance plan are eligible for continued health coverage under NJ’s mini-COBRA benefits law, also known as NJCCR (New Jersey Continuation Coverage Rules). If the worker qualifies for coverage under COBRA, they are not eligible for coverage under the NJCCR. The length of time an employee can receive extended coverage varies:
For termination or reduced hours to below 25 per week: 18 months
Dependent children or spouse of worker who loses coverage due to death or divorce: 36 months
A dependent child who is no longer a dependent: 36 months
If the employee is found disabled by the Social Security Administration at termination or in the 60 days following, they are eligible for 29 months of coverage. If they are no longer disabled, the coverage ends at 18 months or the month that starts 31 days after the employee is determined not to be disabled, whichever is later.
Employees be notified that they have rights to extended coverage at the time of enrollment. They also must be notified in writing that they have the right to continue coverage when a qualifying event occurs. This notice should include the date when they need to elect to continue coverage, the monthly premium amount, due dates, and how they must make their premium payments.
New York: Employees that work for companies that have under 20 workers and are participating in an employer-sponsored health insurance plan are eligible for continued health coverage under NY’s mini-COBRA benefits law. They are eligible for coverage for up to 36 months. Employers must notify the plan administrator of a qualifying event within 30 days and the plan administrator will notify the eligible person of their right to choose continued coverage.
A company’s responsibilities under COBRA can be complicated and this blog is not a comprehensive listing of all the situations an organization may encounter. If you have any questions or concerns regarding your responsibilities under COBRA, please contact us.