Cobra & Hipaa

This information is only to be used as general information and not to be construed as legal advice or opinion.

What is COBRA and does it affect me?

COBRA is the acronym used for the Consolidated Omnibus Reconciliation Act and the main portion of the act that affects you is that it extends medical coverage to employees and their dependents upon termination of coverage from an employer. There are a lot of details to this act and this page is only intended to give an overview on the most common situations.

When an employer has employee benefits and 20 or more employees including part-time employees for over 6 months of the previous calendar year must offer COBRA to employees for the next calendar year. (For the purpose of counting employees, a full time employee would be one that qualifies for the benefit. If the requirement for having the benefit is 32 hours, then 2 employees working 16 hours each would equal a full time employee.) This law applies to all private s ector employers except employers that are maintaining church plans are excluded. State and political subdivision are covered by parallel provisions in Title XXII of the Public Service Act.

So what does all that mean?

In most cases where there are at least 20 employees COBRA is going to apply.

What does COBRA do?

Cobra allows an employee to continue a benefit for up to 18 months, or in some cases, up to 36 months. The benefit is continued with the employee paying the cost of the benefit plus a 2% administration fee.

What events trigger COBRA?

There are six events that trigger COBRA (seven if you want to count bankruptcy, but we are not going into that one). They are:

Termination of employment
Reduction of hours (an employee no longer qualifies for the benefit)
An Employees death
Divorce or legal separation
A dependent child ceases to be a dependent
An employees entitlement to Medicare

The first three items the employer is going to be aware of, the second three items it is the employee's responsibility to notify the employer of the event and must be done within 60 days of the event.

Who can be covered on COBRA benefits?

A qualified beneficiary is someone who was covered by the benefit the day before the coverage ended and can be either the employee or a dependent. Each qualified beneficiary has the right to elect COBRA coverage independent of anyone else. So, a dependent can elect COBRA even if the employee doesn't.

What are the time periods with COBRA?

There are several, some dealing with the notification and election process and others that deal with coverage time periods. Here is a brief look at each starting with the notification periods:

Initial Notification - must be sent out to all participants within 30 days of the start of a benefit. This informs the beneficiaries of their rights under COBRA.
Qualifying Event Notice - To start this, you must understand when the qualifying event happens, it is the day that coverage is lost. For example, you terminate your employment in the middle of the month but you health insurance policy covers you to the end of the month (this varies by company and policy) then the last day of the month is your qualifying event. Your employer has 30 days from the qualifying event to send out the Event Notice, if your employer uses an administrator then they have 30 days to notify the administrator who then has 14 days to send out the notice.
After you have received your notice you then have 60 days to decide if you want to accept COBRA or not.
If you accept COBRA and send the election form in you then have 45 days to pay the premium. You must pay the entire premium due from the time that you lost your coverage. If you look at all these time periods that can amount to 149 days, so you would owe 5 months of premiums plus the 6th month would be due. Once the premium is paid coverage is reinstated retroactive to the time coverage was lost.

Note: The law does not require that coupons or billing notices be sent, it is the individuals responsibility to submit payments in a timely fashion.

Now the coverage time periods:

The maximum coverage period for most situations is 18 months, except for the following
A dependent losing coverage due to losing dependent status is entitled to 36 months of coverage, this would include a child who has turned an age that is no longer eligible for coverage, or who has gotten married.
In the case of divorce or legal separation the dependent(s) that are losing coverage are entitled to 36 months of coverage
A dependent that loses coverage because the employee has elected medicare coverage is entitled to 36 months of coverage
Someone that has become disabled can apply for an 11 month extension from the original 18 months

Some times there are multiple qualifying events, such as an employee terminates employment then 6 months later goes on medicare. This would entitle any dependents that had the original 18 months of coverage an extension to a total of 36 months of coverage. It is important to know - all time periods start with the original qualifying event and at NO TIME can there ever be more than a total of 36 months of coverage.

COBRA for the employer can be scary and it can be confusing for the employee.

Don't get bitten by this snake, Boulder Administration Service offers complete COBRA administration! So many of the companies that claim to administer COBRA only collect the payments. What they fail to do is send out the initial notification letters or even the qualifying event notice. They leave this up to the employer, who is often unaware that this needs to be done.

With our COBRA administration we perform all of the required steps to conform to the law, from the mailing of the initial notification, the COBRA event notice to the termination notice at the end of COBRA.

Services Provided

Mailing of Initial Notification to employees
Upon receiving notice of termination from employer we mail the COBRA notification and election form
Tracking of all time periods
Collection and tracking of all payments
Monthly submission of payments report to employer
Notify participants of information for open enrollment periods
Mailing of Conversion notice
Mailing of Termination notice
Provide Certificate of Creditable Coverage (if not provided by insurer)

We will work with the employer to determine which of the employee benefits that they offer require COBRA administration. Then employer has to notify us of new enrollees in any plan requiring COBRA and any terminations of employees - we handle the rest of the COBRA requirements.

What is HIPAA?

It is the Health Insurance Portability and Accountability Act. This is the law that prohibits waiting periods for pre-existing conditions if there is continuation of coverage form one group health policy to another group health policy. Health insurance companies can only exclude a condition for up to twelve months, and they have to give credit for continuous coverage under a previous plan. Continuous coverage is defined as a break of less than 63 days. A qualifying period for a new health plan can not be counted for the 63 days. Example: someone with a heart condition (with no previous coverage) goes to work for Company A on March 1st and goes through a 3 month qualifying period for the health insurance and their coverage starts June 1st. They quit Company A in November and their health insurance coverage ends at the end of November. While they were covered under Company A's policy there was no coverage for the heart condition because it was a pre-existing condition. January 1st they start a new job with Company B and at the same time begin a new 3 month qualifying period for health insurance.

They are eligible for coverage on April 1st, the new insurance company looks back and sees that they had previous coverage with only a 31 day break in coverage, which was the month of December. Even though there was no coverage for January to the end of March it is not counted as a break in coverage because it was a qualifying period. The new insurance company is still not going to cover the heart condition because there has not been coverage for the previous twelve months. But they have to credit the time he was covered from Company A's policy. So, on June 1st they have to begin covering the heart condition since there was group health insurance coverage since the previous June, they have to include December and the qualifying period in their calculations.

In order for employees to prove the previous coverage to a new insurance carrier, each insurance plan must provide a "Certificate of Creditable Coverage" that shows the effective date and the termination date to an employee that leaves their plan.

The HIPAA requirement of sending a "Certificate of Creditable Coverage" is a natural match to go along with the COBRA administration. This is often required on self-funded plans since there is not an insurer to go back to. We can also provide this service if it is needed.