COBRA Conundrums

By Constance L. Gilchrest

Those who deal with COBRA know the phrases "black and white", "cut and dry", or "easy as pie" will never apply to this federal law. Even the most experienced COBRA veterans find themselves stumped by new situations or the implications of the newly released 2001 Final Regulations.

There are certain COBRA topics that seem to trip people up more than others. Therefore, we have selected two of those issues to address in this article.

• The Relationship Between COBRA and Medicare

The first COBRA lawsuit to be heard by the United States Supreme Court involved Medicare. Geissal vs. Moore Medical Corp. clarified that if an individual was covered under another group health plan, including Medicare, prior to the election of COBRA, they could not be denied COBRA. This decision put an end to the split interpretations regarding COBRA and other existing coverages coming out of lower courts across the country. The Qualified Beneficiary who is entitled to Medicare and then experiences a COBRA Qualifying Event is entitled to a maximum coverage period of 18 months. A spouse or dependent, however, is entitled to 18 months from the Qualifying Event date or 36 months from the Medicare entitlement date, whichever provides more coverage.

If the ex-employee is on COBRA and then becomes entitled to Medicare, the situation is treated differently. According to the IRS 1999 Final Regulations, if a Qualified Beneficiary first becomes entitled to Medicare after electing COBRA, the plan may terminate continuation coverage for that Qualified Beneficiary effective the date of Medicare entitlement. However, this is a secondary event for a spouse or dependent child making them eligible for a total of 36 months of COBRA from the date of the original Qualifying Event.

• Voluntary Removal From a Plan

For a benefits administrator, it is pretty common for an employee to request to be removed from the group health plan. Should COBRA be offered?Individuals who are removed from the group health plan may not have to be offered COBRA because usually the employee canceling the coverage is not experiencing a Qualifying Event. The individuals being removed from the group plan are experiencing a loss of coverage, but COBRA law very clearly states a loss of coverage alone does not entitle one to continuation coverage.A COBRA Qualifying Event is one of the following: termination, reduction of hours, divorce or legal separation, employees Medicare entitlement, a dependent child ceasing to be a dependent child, death of the employee, or the employer's bankruptcy. COBRA must be offered when the Qualifying Event causes a loss of coverage under the terms of the plan.If coverage is reduced or eliminated in anticipation of an event, COBRA may need to be offered when the event actually takes place. This includes cases such as an employer who cancels an employee's coverage in anticipation of terminating employment, or an employee who cancels a spouse's coverage in anticipation of a divorce or legal separation. Covered employees or Qualified Beneficiaries are responsible for reporting to the employer a divorce, legal separation, or a dependent child ceasing to be a dependent.

Clients should have a special notification letter that informs group health plan enrollees when they are being removed from the plan. The required HIPAA Certificate of Creditable Coverage also serves as notice of coverage termination.

Contact BusinessPlans to discuss how we can help with your company's COBRA compliance issues.

This article was adapted from an article by Constance L. Gilchrest from COBRA Compliance Systems, Incorporated. You can visit their web site at www.cobracs.com.