What is COBRA coverage?
COBRA coverage is a continuation of plan coverage when coverage would otherwise end because of a life event known as a “qualifying event.” After a qualifying event occurs and any required notice of that event is provided to the plan’s administrator, COBRA coverage must be offered to each individual losing coverage who is a “qualified beneficiary.” You, your covered spouse and your covered dependent children could become qualified beneficiaries and would be entitled to elect COBRA if coverage under the plan is lost because of the qualifying event. Qualified beneficiaries who elect COBRA generally must pay for the coverage.

Who may elect COBRA?
If you are an employee that works for an employer that employed at least 20 individuals on at least half the work days in the preceding year, you will be entitled to elect COBRA if you lose your group health coverage under the plan because:

• Your hours of employment are reduced, or
• Your employment ends for any reason other than your gross misconduct.

Your spouse will be entitled to elect COBRA if you lose your group health coverage under the plan because:

• Your spouse dies;
• Your spouse’s hours of employment are reduced;
• Your spouse’s employment ends for any reason other than gross misconduct; or
• You become divorced or legally separated from your spouse.

Your dependent child generally will be entitled to elect COBRA if he or she loses group health coverage under the plan because:

• You die;
• Your hours of employment are reduced;
• Your employment ends for a reason other than gross misconduct; or
• Your child stops being eligible for coverage as a “dependent child.”

When is COBRA coverage available?
When the qualifying event is the end of employment or reduction of hours of employment or your death, the plan will automatically offer COBRA coverage to qualified beneficiaries. For the other qualifying events (your divorce or legal separation, or your dependent child’s losing eligibility for coverage as a dependent child), a COBRA election may be available to you only if you notify the plan administrator in writing within 60 days after the later of (i) the date of the qualifying event and (ii) the date on which the qualified beneficiary loses (or would lose) coverage under the plan’s terms as a result of the event.

How do I elect COBRA?
Each qualified beneficiary will have an independent right to elect COBRA on forms provided by your employer. You and your qualifying spouse may elect COBRA on behalf of all of your qualified dependents. Any qualified beneficiary for whom COBRA is not elected within the 60-day election period specified in the plan’s election notice will the right to elect COBRA.

How long does COBRA coverage last?
COBRA coverage is a temporary continuation of coverage. When the qualifying event is your death, divorce or legal separation, or your dependent child’s losing eligibility as a dependent child, COBRA coverage can last for up to 36 months.

When the qualifying event is the end of your employment or the reduction of your hours of employment, and you became entitled to Medicare benefits less than 18 months before the qualifying event, COBRA coverage for your qualified beneficiaries who lose coverage as a result of the qualifying event can last until up to 36 months after the date of Medicare entitlement. Otherwise, when the qualifying event is the end of employment or reduction of your hours of employment, COBRA coverage generally can last for only up to a total of 18 months from the end of the month in which your coverage ends under the non-COBRA provisions of the plan

How can disability affect my COBRA coverage?
If a qualified beneficiary is determined by the Social Security Administration to be disabled and you provide timely notice to the plan administrator, all of the qualified beneficiaries in your family may be entitled to receive up to an additional 11 months of COBRA coverage, for a total maximum of 29 months. This extension is available only for qualified beneficiaries who are receiving COBRA coverage because of a qualifying event that was your termination of employment or reduction of hours. The disability must have started at some time before the 61st day after your termination of employment or reduction of hours and must last at least until the end of the period of COBRA coverage that would be available without the disability extension (generally 18 months). The disability extension is available only if you notify the plan administrator in writing of the Social Security Administration’s determination of disability within 60 days after the latest of:

• the date of the Social Security Administration’s disability determination;
• the date of your termination of employment or reduction of hours; and
• the date on which your qualified beneficiary loses (or would lose) coverage under the plan as a result of your termination of employment or reduction of hours.

You must also provide this notice within 18 months after your termination of employment or reduction of hours in order to be entitled to a disability extension.

What if there is a second Qualifying Event?
If your family experiences another qualifying event while receiving COBRA coverage because of your termination of employment or reduction of hours (including COBRA coverage during a disability extension), your spouse and dependent children receiving COBRA coverage can receive up to 18 additional months of COBRA coverage, for a maximum of 36 months, if notice of the second qualifying event is timely provided. This extension may be available to your spouse and any dependent child receiving COBRA coverage if you die, divorce or legally separate, or if your dependent child stops being eligible as a dependent child, but only if the event would have caused your spouse or dependent child to lose coverage under the Plan had the first qualifying event not occurred. This extension is not available when you become entitled to Medicare after your termination of employment or reduction of hours, and is otherwise available only if you notify the plan in writing of the second qualifying event within 60 days after the later of:

• the date of the second qualifying event; and
• the date on which the qualified beneficiary would lose coverage under the plan as a result of the second qualifying event (if it had occurred while the qualified beneficiary was still covered).

What about newborn or adopted children?
A child born to, adopted by, or placed for adoption with you during a period of COBRA coverage is considered to be a qualified beneficiary provided that, if you are a qualified beneficiary, you have elected COBRA coverage for yourself. The child’s COBRA coverage begins when the child is enrolled in the plan, and it lasts for as long as COBRA coverage lasts for your other family members.

Health Flexible Spending Component
COBRA coverage under the flexible spending account (“FSA”) portion of a cafeteria plan will be offered to qualified beneficiaries losing coverage who have underspent accounts. A qualified beneficiary has an underspent account if the annual limit elected by the covered employee, reduced by reimbursements up to the time of the qualifying event, is equal to or more than the amount of the premiums for health flexible spending COBRA coverage that will be charged for the remainder of the plan year. COBRA coverage will consist of the health flexible spending coverage in force at the time of the qualifying event (that is, the elected annual limit reduced by expenses reimbursed up to the time of the qualifying event). The use-it-or-lose-it rule will continue to apply, so any unused amounts will be forfeited at the end of the plan year, and COBRA coverage will terminate at the end of the year.

What are California’s COBRA rules?
The COBRA discussion above deals solely with federal law. Because federal law generally supersedes state law on employee benefit matters, states generally lack the authority to apply their own COBRA rules on employers. However, federal law generally allows states to regulate insurance, and California law compels insurance companies to include COBRA-like provisions in the group health insurance policies they sell. The most significant effects of California’s “COBRA” rules are that they (i) extend continuation coverage availability to small employers that employ fewer than 20 individuals and (ii) effectively extend the 18-month standard maximum COBRA coverage period to 36 months. Once the 18-month federal COBRA period in which an employee may continue participation in the employer’s plan expires, a second 18-month period commences in which the individual may continue coverage under the same policy directly with the carrier.

How Can Echelon Help?
Echelon can advise employers of its responsibilities under COBRA, provide required notices and forms, and assist with COBRA administration. Echelon can also advise individuals on the COBRA rules, and assist with the transition from COBRA coverage under an individual policy.

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