The Basic COBRA Rules
At its most basic, COBRA is a set of laws and regulations that state that
- A qualified beneficiary who
- loses group health plan coverage
- due to a qualifying event
- may elect to continue and pay for group health plan coverage
- for a limited time period.
Which Employers Have to Comply with the COBRA Rules?
Almost all group health plans must comply with COBRA. The following groups do not have to meet the COBRA requirements:
- Employers with fewer than 20 employees during the prior calendar year
- Some church plans
- Federal government plans
What Triggers COBRA?
An employee’s COBRA rights and an employer’s COBRA responsibilities are generally triggered when the employee experiences a “qualifying event.” A qualifying event means that three things have occurred: (1) a “triggering event” (2) the employee has a “loss of coverage” under a group health plan, and (3) the triggering event caused the loss of coverage.
There are only seven specific triggering events listed in the COBRA rules and only six apply for the vast majority of plans. They are:
- termination of employment (other than for gross misconduct);
- reduction in hours of employment;
- divorce or legal separation;
- a dependent child loses dependency status; and
- employer bankruptcy (retiree plans only); and
- Medicare entitlement (almost never applies because of the Medicare secondary payer rules.)
Loss of Coverage
A loss of group health plan coverage means that an employee has ceased “to be covered under the same terms and conditions as in effect immediately before the qualifying event.” Obviously, if an employee loses coverage entirely, there is a loss of coverage. But the rule also considers a change in the coverage “terms and conditions” as a “loss.” For example, a loss could be:
- an increase in required premiums;
- a reduction of benefits; or
- any other change in the terms or conditions of coverage.
Triggering Event Must Cause Loss of Coverage
One of the most misunderstood COBRA requirements is that if a triggering event does not cause a loss of coverage, there is no qualifying event. Similarly, if a loss of coverage occurs for a reason that is not a triggering event, there is no qualifying event. In both of these cases, there is no qualifying event and, therefore, generally no obligation to offer COBRA.
There are many other COBRA rules that aren’t addressed in this summary, including what coverage must be offered and what notices must be sent and when. However, those rules are beyond the scope of this summary. Please contact your Northwestern Benefit Account Manager or Benefits Consultant for more information.
Here is an additional resource that you may find helpful:
DOL: An Employer’s Guide to Group Health Continuation Coverage under COBRA