COBRA BASICS

1
COBRA BASICS

• Presented by
• University of Wisconsin System Administration
  Office of Human Resources
• May, 2006

2
COBRA Basics

• What is COBRA?
• COBRA stands for Consolidated Omnibus Budget
  Reconciliation Act (COBRA) of 1986. COBRA
  applies to employers with 20 or more employees.
• COBRA provides certain former employees,
  retirees, spouses, former spouses, and dependent
  children the right to temporary continuation of
  health coverage at group rates.  This coverage,
  however, is only available when coverage is lost
  due to certain specific events. 

3
COBRA Basics

• Who is eligible for COBRA?
• Qualified Beneficiaries - An individual covered
  by a group health plan on the day before a
  qualifying event who is an employee, the
  employee's spouse or dependent child. 
• In certain cases, a retired employee, the retired
  employee's spouse, and the retired employee's
  dependent children may be qualified
  beneficiaries. 
• Any child born to or placed for adoption with a
  covered employee during the period of COBRA
  coverage is considered a qualified beneficiary. 

4
COBRA Basics

• COBRA must be offered if there is a qualifying
  event. A qualifying event for an employee is
• Voluntary or involuntary termination of
  employment for reasons other than gross
  misconduct.
• Termination of employer contribution (reduction
  of the employer contribution does not qualify).
• A voluntary cancellation of coverage does not
  qualify for COBRA continuation.

5
COBRA Basics

• Qualifying events for dependents are
• The voluntary or involuntary termination of the
  covered employee's employment for any reason
  other than gross misconduct
• Loss of employer contribution (reduction in the
  contribution does not qualify)
• Divorce or legal separation of the covered
  employee
• Death of the covered employee
• Loss of dependent child status
• Voluntary cancellation of coverage does not
  qualify.

6
COBRA Basics

• What are the notification requirements for COBRA?
• Employees must be notified of their COBRA rights
  within 90 days of the coverage effective date.
  This requirement is met by way of the notice
  located in Section B of the Its Your Choice
  booklet.
• Plan participants and beneficiaries must be sent
  an election notice not later than 14 days after
  the plan administrator (the employer) receives
  notice that a qualifying event has occurred. 

7
COBRA Basics

• The individual then has 60 days to decide whether
  to elect COBRA continuation coverage. 
• If the individual initially declines to continue
  coverage, he or she may change his or her mind
  within the 60-day election period.
• The person has 45 days after electing coverage to
  pay the initial premium.
• Each covered individual has an independent right
  to elect continuation (if there are only two
  individuals electing continuation, two single
  plans will be less expensive than one family
  plan).

8
COBRA Basics

• When the employer does not know about the
  qualifying event
• A qualified beneficiary must notify the campus
  benefits office of a qualifying event within 60
  days after divorce or legal separation or a
  child's ceasing to be eligible as a dependent
  under plan rules.
• Failure to do so will result in the dependents
  loss of eligibility for COBRA continuation.
• Dependents must be notified of COBRA rights even
  if they are not eligible.
• Important Notes Under State law, coverage for
  an ex-spouse remains in force until the ex-spouse
  is notified of the continuation rights, provided
  family premiums continue to be paid. Coverage
  for the ex-spouse (and any step-children) ends at
  the end of the month in which the employer is
  notified of the event.
• Employees should not terminate family coverage in
  anticipation of a divorce as the employee may be
  liable for medical expenses incurred by the
  spouse.

9
COBRA Basics

• Important Notes Under State law, coverage for
  an ex-spouse remains in force until the ex-spouse
  is notified of the continuation rights, provided
  family premiums continue to be paid. Coverage
  for the ex-spouse (and any step-children) ends at
  the end of the month in which the employer is
  notified of the event.
• Employees should not terminate family coverage in
  anticipation of a divorce as the employee may be
  liable for medical expenses incurred by the
  spouse.

10
COBRA Basics

• There is no change in premium when continuing
  coverage - but there is no employer contribution.
  (Under COBRA, the employer may charge up to 102
  of the active employer premium, but the State
  does not charge the additional 2.)
• A qualified beneficiary electing to continue
  coverage will remain in the same health plan.
  There can be no lapse of coverage, so all back
  premiums must be paid.
• Individuals on continuation have all of the same
  rights as active members. They also may change
  plans annually during Dual-Choice.

11
COBRA Basics

• If a dependent child does not live in the same
  county as the employee, he or she may select a
  different health plan at the time he or she
  elects to continue coverage.
• If an individual moves while on continuation, he
  or she may select a different health plan by
  notifying ETF within 30 days of the move.
• If a graduate assistant accepts a permanent WRS
  position, he may continue the graduate assistant
  coverage until the employer contribution begins
  in the new appointment. If the position is
  unclassified, the employer contribution begins on
  the first of the month after the application is
  submitted. As such, no continuation will be
  offered.

12
COBRA Basics

• How long does COBRA coverage continue?
• Federal law requires that the former employee be
  allowed to continue coverage for 18 months.
  Under the State Group Health program, however,
  all qualified beneficiaries may continue coverage
  for up to 36 months.
• Because the employer contribution is paid two
  months in advance, qualified beneficiaries
  actually have an additional 34 months of
  continuation available.
• 36 months the two months premium is paid in
  advance 34 months remaining under COBRA.

13
COBRA Basics

• Under what circumstances might COBRA coverage end
  before the end of the 36-month period?
• If premiums are not paid on a timely basis
• After the COBRA election, coverage is obtained
  with another employer group health plan that does
  not contain any exclusion or limitation with
  respect to any pre-existing condition of such
  beneficiary. 
• The employer ceases to maintain any group health
  plan.

14
COBRA Basics

• What is conversion?
• At the end of COBRA coverage, the participant
  must be given the option of converting to an
  individual policy.
• The health plan must provide notice of the option
  to enroll in a conversion health plan within 180
  days before COBRA coverage ends. 
• The premium for a conversion policy will be more
  expensive than the premium of a group plan, and
  the conversion policy may provide a lower level
  of coverage. 
• The conversion option, however, is not available
  if the beneficiary ends COBRA coverage before
  reaching the end of the maximum period of COBRA
  coverage.

15
COBRA Basics

• Does the employee get COBRA benefits while on
  FMLA leave?
• The Family and Medical Leave Act requires an
  employer to maintain group health coverage for an
  employee on FMLA leave just as it would have
  provided if the employee had continued working. 
• Coverage provided under the FMLA is not COBRA
  coverage, and 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 notifies an employer of his or her
  intent not to return to work.

16
COBRA Basics

• In addition to COBRA, there is also state
  continuation (S. 632.897, Wis. Stats). Under
  state continuation, the member must be covered
  for three months before the qualifying event.
  The state provides for 18 months of continuation.
  This runs concurrently with COBRA, if both
  apply.

17
COBRA Basics

• COBRA and state continuation under s. 632.897,
  Wis. Stats., do not apply to life insurance
  plans.
• Group life insurance plans may offer
  continuation, but must offer conversion under s.
  632.57, Wis. Stats.

18
COBRA Basics

• Which benefit programs require COBRA notices?
• Health Insurance ET-2311 (rev. 4/05)
• May continue coverage for up to 36 months
• Epic E11472
• Must be covered for 3 months
• May continue coverage for up to 36 months
• Retirees have own plan so not limited to 36
  months
• Dental UWS-8 or OSER-DCLR-216 (12/05)
• May continue coverage for up 18 months if the
  employee terminates employment.
• May continue coverage for up 36 months if the
  dependent loses eligibility or employee dies.
• Retirees may continue indefinitely
• ADD UW1249 (at retirement only)
• UIA F.UW1443
• ERA - ET-1518
• Domestic Partners are eligible for continuation

19
COBRA Basics

• Which plans offer only conversion to an
  individual plan?
• State Group Life
• Individual and Family Life
• UW Employees, Inc.
• ADD (except at retirement)
• Eligible employees may continue coverage,
  although coverage is reduced per plan provisions.
• Domestic Partners are eligible for conversion
• Note These plans are not subject to COBRA.

20
COBRA Basics

• Questions?
• Contact your campus staff benefits office.