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Frequently Asked Questions: COBRA

What is COBRA?
Must all employers comply?
If a Qualifying Event occurs, how quickly must an employer mail the Election Notice?
How quickly must a beneficiary elect coverage?
Are non-full-time employees counted to determine the 20+ employee cut-off?
Are certain employers exempt?
Who pays the premium?
What can an employer do if a COBRA premium check does not clear?
If a member is eligible for other group coverage, may they remain on COBRA?
Who qualifies for benefits?
Do Domestic Partners qualify for continuation?
What is a Qualifying Event?
How long can coverage continuation extend?
Are there expanded continuation benefits for Reservists?
Can dependents be added by a person on COBRA?
Are those eligible for Medicare still eligible for COBRA?
Must new plans be offered to COBRA continuees?
What if a continuee moves outside of the service plan area?
What are the NY laws regarding COBRA for groups that don’t qualify for federal COBRA?

1. What is COBRA?
COBRA is a Federal Law. Terminated employees and/or covered dependents that lose coverage because of reduced hours may continue on the group medical and dental benefits for a limited time. If entitled to benefits, the health plan must notify the beneficiary and allow 60 days for the election of coverage. Once selected, the continuee(s) pays the full premium. The employer may impose a 2% surcharge. Those who extend coverage to 29 months due to Medicare disability may be charged 150% of the total premium.

2. Must all employers comply?
All employers – including those who are self-insured – who have 20+ on payroll (including full time, part time, union and non-union) for 50% of business days in the preceding year must offer COBRA. Certain exceptions do apply and independent contractors (1099 employees) do not count in the 20+ employees.

3. If a Qualifying Event occurs, how quickly must an employer mail the Election Notice?
The Employer has 14 days. If the employer uses a COBRA administrator, an additional 30 days is allotted. It is recommended that the notice be mailed First Class mail or with a Certificate of Mailing to avoid possible delays.

4. How quickly must a beneficiary elect coverage?
A beneficiary has 60 days from loss of coverage or receipt of the Election Notice. An extension applies to victims of Hurricane Katrina.

5. Are non-full-time employees counted to determine the 20+ employee cut-off?
Yes. All full-time employees count, and those working non-full-time count as fractions.

6. Are certain employers exempt?
The Federal Government, church-related organizations, and those that have less than 20 employees (or have only had 20 or more for less than 50% of the preceding year) are exempt.

7. Who pays the premium?
Continuees pay the full premium. The employer may charge an optional 2% administrative fee. If a continuee extends coverage to 29 months due to Medicare disability, the employer may charge 150% of the total premium.

8. What can an employer do if a COBRA premium check does not clear?
COBRA election forms and notices should clearly indicate that coverage will be terminated due to nonpayment. To keep coverage, a Qualified Beneficiary must pay the entire COBRA premium, although victims of Hurricane Katrina may have extended time. If payment is timely and the amount is not significantly less than the premium, the plan must either: (1) accept it as payment in full; or (2) notify the individual that an additional amount is owed and provide a period to pay the amount owed even if allowed after the grace period. If a check bounces, however, such additional time need not be allowed.

9. If a member is eligible for other group coverage, may they remain on COBRA?
Members are removed if they have enrolled in other group coverage.

10. Who qualifies for benefits?
Qualified Beneficiaries are those covered the day of the Qualifying Event. Adult Children covered under Chapter 375 in N.J. are not eligible unless the employee has a Qualifying Event and elects continuation.

11. Do domestic partners qualify for continuation?
The N.J. Small Group contract defines Domestic Partners as spouses, but under the Federal Defense of Marriage Act of 1996 law, Domestic Partners do not qualify as spouses for COBRA purposes. However, an employer may choose to provide COBRA-like rights to domestic partners. In this case, legal assistance is advised, as clear eligibility criteria, special plan documents, notices, and the agreement of the insurance carrier are required.

12. What is a Qualifying Event?
A qualifying event is one which includes termination of employment for other than gross misconduct or reduction of hours that results in the loss of eligibility for coverage. For dependents, a Qualifying Event includes the death of the employee, divorce or legal separation from the employee, or loss of dependent child status under the plan rules. Spouses and dependents that lose coverage due to the employee's entitlement to Medicare are allowed 36 months of coverage, beginning on the date of the employee’s Medicare entitlement. COBRA is not available to an Adult Child covered under Chapter 375 in N.J. unless the employee or parent has a Qualifying Event and elects continuation.

13. How long can coverage continuation extend?
Employees may continue 18 months with or without their dependents. A member who is deemed Medicare-disabled retroactively within the first 60 days of being on COBRA may extend to 29 months. Dependent Qualifying Events allow continuation for 36 months. (This does not apply to Adult Children who are no longer eligible. COBRA is not available to an Adult Child covered under Chapter 375 in N.J. unless the employee or parent has a Qualifying Event and elects continuation.) Reservists may elect continuation coverage for 24 months.

14. Are there expanded continuation benefits for Reservists?
The Veteran's Benefits Improvement Act of 2004 allows Reservists and their families to continue employer-sponsored coverage up to 24 months from when the Reservist begins active duty. The 24-month period is measured from the first day the Reservist begins active duty. Employers may charge Reservists whose active duty is over 31 days up to 102% of the full cost of benefits.

15. Can dependents be added by a person on COBRA?
COBRA continuees have the same rights as active employees. If the employer allows dependent coverage, the COBRA continuee may add a spouse or child.

16. Are those eligible for Medicare still eligible for COBRA?
Yes.

17. Must new plans be offered to COBRA continuees?
Yes.

18. What if a continuee moves outside of the service plan area?
If there is no other plan in place, the employer is not obligated to create a plan solely for the continuee. If there is another plan available, the continuee may be moved to that plan immediately.

19. What are the NY laws regarding COBRA for groups that don’t qualify for federal COBRA?
NY COBRA generally applies to fully insured groups that do not qualify for Federal COBRA. Churches are eligible for NY COBRA, but not Federal COBRA. The continuation timeframes, election period, and costs are the same as Federal COBRA. Persons enrolled or eligible for Medicare or any other group coverage may not enroll in NY COBRA.