Q&A Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

October 28, 2008

Who is a qualified beneficiary under COBRA?

Under ERISA Section 607(3); Code Section 4980B(g)(1), PHSA Section  2208(3), and Treasury Regulations Section 54.4980B-3, Q/A-1(a)(1), a qualified beneficiary is an employees, spouse and dependent children, covered on the day before the qualifying event. It can include a child born or adopted by a covered employee during COBRA. A spouse added by a COBRA beneficiary during COBRA is not a qualified beneficiary. Former dependent is a qualified beneficiary and may add children during COBRA.

Can a qualified beneficiary change coverage elections during COBRA?

Yes, during annual enrollment, a qualified beneficiary must be given the same coverage choices as active employees, as provided in Treasury Regulations Section 54.4980B-5, Q/A-4(b).

Can a qualified beneficiary add benefit coverages during open enrollment?

Yes, a qualified beneficiary must be given the same options as active employees, as provided in Treas. Reg. § 54.4980B-5, Q/A-4(c).

When a qualified beneficiary elects COBRA coverage, must he or she be given a separate election for each benefit offered or one election for all benefits?

Under Treasury Regulations Section 54.4980B-2, Q/A-6, it depends. If an employer offers medical, dental, and vision under separate plans, the employer cannot offer the qualified beneficiary three separate elections

If the employers offers all benefits under one plan, the employer is only required to offer one election for all benefits.

When does an individual’s entitlement to Medicare terminate COBRA coverage?

If a qualified beneficiary’s Medicare entitlement occurs after COBRA coverage is elected, then the qualified beneficiary’s COBRA coverage can be terminated even though Medicare does not provide a benefit package as generous as the COBRA coverage, as provided in Treas. Reg. § 54.4980B-7, Q/A-3(a).

What is the effect on COBRA coverage if a covered employee becomes entitled to Medicare before the qualifying event?

When a covered employee’s qualifying event (i.e. a termination of employment or reduction of hours) occurs within the 18-month period after the employee becomes entitled to Medicare, the employee’s spouse and dependent children (but not the employee) become entitled to COBRA coverage for a maximum period that ends 36 months after the covered employee becomes entitled to Medicare, as provided in ERISA Section 602(2)(A)(v); Code Section 4980B(f)(2)(B)(i)(V); PHSA  Section 2202(2)(A)(iv) and Treasury  Regulations Section  54.4980B-7, Q/A-4(d)(1).

Does an employer still have to offer COBRA coverage to a qualified beneficiary if he or she becomes entitled to Medicare before the qualifying event?

Yes. When a qualified beneficiary is entitled to Medicare prior to electing COBRA coverage, he or she still receives COBRA coverage.  Because of the Medicare Secondary Payer Rules, the COBRA offer cannot be withheld because of Medicare entitlement.

One of my employees dropped his spouse from health coverage during annual enrollment and then files for divorce a few months later.  Does the employer have to offer the spouse COBRA coverage?

Yes.  Under Treasury Regulations Section 54.4980B-4, Q/A-1(c) and Revenue Ruling. 2002-88. a spouse is entitled to elect COBRA only if:

  • The divorce actually occurred and
  • The employee eliminated or reduced the spouse’s coverage “in anticipation” of the divorce.

When an employee retires and is offered retiree coverage by the employer, should an employer also provide such former employee with an election for COBRA coverage?

Yes. If a retiree is provided a COBRA Notice when electing retiree coverage and elects retiree coverage, such election cuts off any right to COBRA in the future, as provided under Treasury Regulations Section 54.4980B-4, Q/A-1(c).

In a situation where a married couple separately elect COBRA, does the employer charge each of them the single premium or does the family premium apply?

Under Revenue Ruling 96-8, the employer will comply with COBRA continuation coverage requirements by requiring the couple to jointly pay 102 percent of the family rate.