COBRA How to Stay in Compliance. JW Terrill June 18 th, 2013

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1 COBRA How to Stay in Compliance JW Terrill June 18 th, 2013

2 Overview Qualified Beneficiaries and their rights under the Federal COBRA Law Qualifying Events Coverage Periods Coverage Types COBRA Notices & Election Periods Terminating COBRA Coverage How COBRA integrates with other Laws Penalties for Non-Compliance Q&A

3 Qualified Beneficiaries and their COBRA rights Definition of a Qualified Beneficiary under COBRA Covered employees may be non-employees Children as qualified beneficiaries Qualified beneficiaries with other coverage or Medicare Entitlement

4 COBRA Qualifying Events Termination of a covered employee s employment (other than for gross misconduct) A reduction in a covered employee s hours of employment The death of a covered employee A divorce or legal separation from the covered employee Ceasing to be a dependent child under the terms of the plan The covered employee s becoming entitled to Medicare Employer bankruptcy (this relates only to retiree plans)

5 COBRA Coverage Periods 18-Months of COBRA Coverage Termination of employment Reduction in hours 36-Months of COBRA Coverage Death of employee Divorce or legal separation of employee Child loses dependent status Employee becomes entitled to Medicare Multiple Qualifying Events

6 COBRA Coverage Types What Plans are subject to COBRA Coverage offered must be the same as before the Qualifying Event Qualified beneficiaries may change coverage at Open Enrollment Qualified beneficiaries may add family members under HIPAA Special Enrollment Rules

7 COBRA Notices Initial COBRA Notice Qualifying Event Notice/Election Notice Unavailability of COBRA Notification Termination of COBRA Notice Notice of COBRA premiums short by insignificant amount Other Notices Open Enrollment Materials Individual Conversion Notices HIPAA Certificates of Creditable Coverage Notice of Change in COBRA premium

8 COBRA Election Periods COBRA event occurs Plan Coverage Ceases Employer Notifies Plan Administrator of Qualifying Event-If the Employer and Plan Administrator are the same the regulations state that the Employer has 44 days from COBRA event date to send COBRA Qualifying Event/Election Notice to Qualified Beneficiary. If the Employer and the Plan Administrator are not the same the Employer has 30 days after the qualifying event to notify Plan Administrator and the Plan Administrator then has 14 days after notification to send out COBRA Qualifying Event/Election Notice. Plan Administrator Provides COBRA Qualifying Event/Election Notice-Qualified Beneficiary then has 60 days from the later of the date that group health plan coverage is lost or the date the plan administrator provides the COBRA Election Notice Qualified Beneficiary Elects COBRA the initial COBRA premium payment is due no later than 45 days after the qualified beneficiary elects COBRA.

9 Terminating COBRA Coverage COBRA coverage can be terminated early for non-payment of premium COBRA participant becomes entitled to Medicare. COBRA participant becomes eligible for other group health coverage Maximum period of COBRA coverage has been exhausted

10 How COBRA Integrates with other laws Family and Medical Leave Act (FMLA) State Continuation TAMRA The Trade Adjustment Act (TAA) Uniformed Services Employment and Reemployment Rights Act (USERRA)

11 Penalties for Non-Compliance Failure to comply with COBRA can lead to significant financial consequences. Excise tax penalties may be assessed by IRS (up to $200 per day) for each day a plan fails to comply with COBRA Statutory penalties of $110 per day may be recovered (by qualified beneficiaries) for failure to provide initial notice and election notices under COBRA Qualified beneficiaries may sue to recover COBRA coverage. Such suits carry the potential for large damages. Failure to provide adequate initial and election notices can create exposure to other relief.

12 Additional Information Due to Health Care Reform that goes into effective October 1, 2013 there will be new language regarding the Health Insurance Marketplace. For more information about health insurance options available through a Health Insurance Marketplace, visit

13 Q&A Questions Additional Resources COBRA Information Joni Horvath