COBRA Participants & Open Enrollment

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COBRA regulations state that COBRA qualified beneficiaries (QBs) are entitled to the same rights under a group health plan as are similarly situated non-COBRA beneficiaries i.e. active participants (§ 54.4980B-5 Q&A-1).

COBRA qualified beneficiary includes:

  • individuals currently enrolled and paying for COBRA
  • individuals in their 60-day election period
  • individuals who have elected, but not yet paid for COBRA

During open enrollment, COBRA qualified beneficiaries have the same rights as active employees. (§ 54.4980B–5 Q&A–4c)  For instance, they may:

  1. Add coverage they didn’t previously have while on COBRA (e.g., enroll in dental and vision coverage at OE even if previously covered only by medical) § 54.4980B-5, Q/A-4
  2. Drop coverage
  3. Add dependents (as non-qualified beneficiaries with no independent COBRA rights), even if they were not covered at the time of the qualifying event § 54.4980B-5, Q/A-5
  4. Drop dependents
  5. Switch to another benefit package within the same plan (e.g., change medical plan option from PPO to HMO).

To be compliant, during open enrollment it’s important that employers remember to provide COBRA QBs everything they would need to make an informed coverage decision and election as if they were active employees.  The open enrollment materials must be provided to QBs in a manner that is “reasonably expected to ensure receipt”. Generally, this would mean 1st class mail to the last known home address. A Certificate of Mailing is also a best practice. 

Who Is Responsible for Offering COBRA Open Enrollment? 

COBRA open enrollment is always the responsibility of the employer.  Even if the employer has a third party administrator (TPA) handling COBRA notices, ultimately it is still the employer’s responsibility to communicate with their TPA on who will be handling the COBRA open enrollment. This is typically not included as part of the regular TPA COBRA administrative services, but many will assist for an additional fee.

What if an enrolled participant doesn’t send back their OE election?

There are different schools of thought on the answer to this question.

Per COBRA statutes, there are only 6 ways COBRA may terminate before max. coverage period ends: (§ 54.4980B–7 Q/A-1)

  1. Failure to pay on time
  2. Early termination when employer ceases to provide any group health plan
  3. Early termination because of coverage under other group health plan coverage
  4. Early termination because of Medicare entitlement
  5. Early termination when QB in disability extension found not disabled
  6. Early termination for cause (e.g. fraudulent claims)

There is nothing in the regulations that says failure to re-elect during OE is cause for termination. So, it’s my understanding, if the plan(s) the participant is on didn’t change, then their coverage should roll over into the new plan year and they should be billed the new plan year’s premiums. If the plans did change, they should be enrolled in the plan most comparable (i.e. what replaced the coverage they had).  If they fail to send in payment, they’ll term for non-payment accordingly.

However, that being said, at least one court has held that the plan may terminate COBRA coverage for a QB who fails to re-enroll after they are provided OE materials and are notified that failure to re-enroll will lead to a loss of coverage. This is because, §54.4980B-7, Q/A-1(b), provides that “a group health plan can terminate for cause the coverage of a qualified beneficiary receiving COBRA continuation coverage on the same basis that the plan terminates for cause the coverage of similarly situated nonCOBRA beneficiaries.”  So some interpret this, (as did the the court ruling) to mean, because COBRA participants have the same rights (and responsibilities) during open enrollment as similarly situated employees, if an employer requires active enrollment by employees during open enrollment, they can require active enrollment by COBRA participants too.

In my experience, it’s best to keep QBs enrolled on their current plans (or the the plans most comparable to what they currently have) unless an employer is provided other guidance from their legal counsel.

NOTE: Don’t forget about your employees on FMLA. They too have the same open enrollment rights for the health plan as active employees

 

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