Understanding COBRA and State Continuation (Mini Cobra)

It’s been a tough 4 months! No doubt you have had to adjust your workplace, hours of operation, and various other processes to maintain operation during the COVID-19 Pandemic. One of which is employee’s status changing from full time to part time, or furlough and layoff.

Do you offer Benefits? As employees leave and come back don’t forget that continuation of coverage must be offered if they are enrolled in your health, dental or vision plan.

When an employee loses eligibility and was enrolled on your qualifying plan, you will need to offer COBRA or State Continuation (Mini-Cobra) within 14 days of event. Usually an employee is removed from coverage when they leave, and the put back on when they elect & pay for coverage. The effective date of COBRA is always the day after coverage under the group plan ends.


Does your company need to comply with COBRA or State-Continuation?

For Federal COBRA – you will count Full and Part Time employees, for the previous calendar year. If you had more than 20 for more than 50% of the previous calendar year you must offer COBRA starting January 1 of the following year. If you are below 20, you will offer State Continuation.


Federal COBRA

COBRA under Federal regulations state that any qualifying employer with more than 20 employees must offer continuation coverage for 18 months (or 36), if employee was enrolled on a qualifying plan and lose coverage in a qualifying event. Notices must be furnished when they begin the plan, and when coverage ends. An employee then has 60 days to elect and pay for the continuation coverage.


  • Stands for Consolidated Omnibus Budget Reconciliation Act.

  • All dependents who were covered under the plan have a right to continue coverage under COBRA.

  • Employees may be charged up to 102% of total premiums each month. (2% to cover administration charges)

  • Coverage can stay in effect for 18 months (36 months for some situations)

COVID-19 National Emergency CARES Act twist: The CARES act (Coronavirus Aid, Relief, and Economic Security Act) signed into law on March 27 2020, now gives qualifying members more time to elect COBRA. Effective March 1, 2020 through 60 days after the national emergency ends (no date determined yet) the deadlines for qualifying members to elect coverage is suspended. (So they could elect coverage 60 days after it ends which could be much more time than 60 days) This will give terminated employees much more time to elect and pay for COBRA coverage. At this point there is no requirement to adjust the COBRA notice, but some administrators already have included language.


What more information about COBRA? Please See this FAQ from the Department of Labor:

Click Here



State Continuation or Mini Cobra

Employers in Utah that offer qualifying medical coverage and have less than 20 employees must offer State Continuation or Mini-Cobra within 30 days of loss of coverage, if the employee was enrolled in the plan for more than 3 months. Employee then have up to 30 days (60 days total from loss of coverage date) to elect and pay for coverage, and coverage can continue for up to 12 months.


COVID-19 National Emergency noted above for COBRA doesn’t apply for Mini Cobra.


Qualifying Events for COBRA and Mini Cobra:

Not all loss of coverage is considered an event to trigger COBRA or Mini Cobra coverage. If an employee chooses to terminate coverage but is still active and eligible, it is not a COBRA event for his family. If an employee commits ‘gross misconduct’ and is terminated – COBRA may not be offered. I advise clients to seek legal council if they believe a situation falls under ‘gross misconduct’ and plan not to offer COBRA as this may lead to additional liability or litigation. Here are the Qualifying Events to offer COBRA


For Employees:

  • Termination of the employee’s employment for any reason other than “gross misconduct”; or

  • Reduction in the number of hours of employment.

If a spouse or child lose coverage:

  • Termination of the covered employee’s employment for any reason other than “gross misconduct”;

  • Reduction in the hours worked by the covered employee;

  • Covered employee becomes entitled to Medicare;

  • Divorce or legal separation of the spouse from the covered employee; or

  • Death of the covered employee.

Additionally if a child loses coverage:

  • Loss of “dependent child” status under the plan rules. Under the Affordable Care Act, plans that offer coverage to children on their parents’ plan must make the coverage available until the adult child reaches the age of 26.

State Continuation (under 20) In-eligible

An individual is not eligible for State Continuation under state law if he or she:

  • Was enrolled on the group plan less than 3 months

  • Fails to pay any required individual contribution

  • Acquires other group coverage that covers all preexisting conditions, including maternity, if maternity coverage is provided

  • Commits fraud in connection with the coverage

  • Makes an intentional misrepresentation of material fact under the terms of the coverage

  • Is terminated for gross misconduct

  • Is eligible for continuation coverage under federal COBRA

  • Establishes residence outside of this state

  • Moves out of the insurer’s service area


Timing of COBRA notices

It is very important that the proper notices be sent out at the correct time for COBRA. If the notices are not sent out timely, it will put additional liability on the company. For this reason, Fringe Benefit Analysts pays for a COBRA administer for all our client employers with more than 20 employees and send out notices for State Continuation. Its very important that you notify us right away when you have a new enrollee, and a termination so we can make sure these occur.


  • Initial Notice – During the first 90 days of coverage a general cobra notice must be sent out to the employee and spouse describing COBRA rights.

  • Qualifying Event Notice – Must be issued within 14 days after employer received notice of event. (this happens automatically between Employee Navigator and Accrue Cobra Management Services if it is set up as such.) Employees coverage as a full-time` employee is cancelled.

  • Reinstatement upon election and payment – Member must send in acceptance of COBRA to the Cobra Administrator (Accrue CMS) within 60 days of loss of coverage. (suspended during COVID-19 National Emergency). They also have 30 days to make the initial payment of premiums. Coverage will not be reinstated until initial payment has been made. COBRA administrator follows payments and deadlines alerting you and us when any action is needed. Once elected, COBRA participants may show up separately on your bill.

  • Cancellation of COBRA. If member requests cancellation or doesn’t pay premiums within the 30 days grace period, their coverage will be cancelled. Otherwise, COBRA length is 18 months, or up to 36 in some cases of disability and Medicare.



Alternate Coverage to COBRA

Often if an employee is leaving and doesn’t have another job already set up – they may qualify for a subsidy from www.healthcare.gov. Loss of employer coverage is a life event to enroll but it must be done within 60 days of date of event. Members should list their annual estimated income carefully as this projection impacts their subsidy. If they underestimate income and get too much of a subsidy – they may have to pay all or a portion of it back.


Tips and Tricks

Employers can pay for COBRA – but it may set a precedence for future liability. Proceed with caution. You may want to get legal advice in these situations.

  • Always notify of terminations of employment as soon as you learn about it. We only have 14 days for notice to be issued, and you don’t want to be caught at the end of the 14 days!

  • Monthly Reports: COBRA sends out reports for those that are in the election period, and enrolled. Make sure you look at them every month

  • Mini cobra doesn’t have any reports – you may need to establish your own tracking system. Ask me for suggestions


Websites:

https://www.dol.gov/general/topic/health-plans/cobra

https://insurance.utah.gov/consumer/health/extension-conversion-rights/extension


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