Consolidated Omnibus Budget Reconciliation Act (COBRA)
“COBRA” – passed by Congress in 1985, amends the Employee Retirement and Income Security Act (ERISA). As enacted, employers with 20 or more employees offering group health plans are required to provide continuation of coverage to “qualified beneficiaries” during the course of certain “qualifying events.” 

“Qualified beneficiaries” are defined under the law, but are generally anyone covered under the group health plan on the day before a qualifying event.

The following are examples of COBRA qualifying events:

Employees:

• Voluntary or involuntary termination of employment for reasons other than gross misconduct
• Reduction in the number of hours of employment

Spouses & Dependent Children:

• In the case of a child, loss of dependent status under the plan rules
• Voluntary or involuntary 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's becoming entitled to Medicare
• Divorce or legal separation of the covered employee
• Death of the covered employee

Compliance with the law is mandatory and reinforced by significant fines and penalties.  In addition, former employees and dependents have the right to sue former employers for COBRA coverage and damages. 

Notification requirements:
As an employer, you have the following notification responsibilities under the law:

• Initial Notice – An “initial notice” must be provided to each employee and employee’s spouse at the time coverage under the plan begins.
• Election Notice – After the employer has been notified of a qualifying event, the plan administrator must provide the employee with notification of their rights under the law.

The qualified beneficiary is required to notify the plan administrator of a qualifying event within 60-days. The plan administrator then has 14-days to notify participants and beneficiaries of their continuation rights under the law. The covered individual then has another 60-days to decide to elect COBRA continuation.

When does COBRA coverage begin and end?
Generally, COBRA coverage begins as of the date coverage under the employer sponsored health plan has been lost.

Coverage under COBRA continues for a maximum of 18-months; however under certain circumstances coverage can be extended for up to 36-months. In addition, under California Assembly Bill 1401, an extension of COBRA may be available to participants covered under a California group contract.

Coverage will end at the earlier of these maximum periods, or:

• Premiums are not paid on a timely basis
• The employer ceases to maintain any group health plan
• After the COBRA election, coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary.  However, if other group health coverage is obtained prior to the COBRA election, COBRA coverage may not be discontinued, even if the other coverage continues after the COBRA election.
• After the COBRA election, a beneficiary becomes entitled to Medicare benefits.  However, if Medicare is obtained prior to COBRA election, COBRA coverage may not be discontinued, even if the other coverage continues after the COBRA election.

How are premiums determined and who pays the cost of COBRA coverage?
The qualified beneficiary is required to bear the cost of continuing coverage. Generally, premium is 102% of the cost of the plan for active participants.

Health Insurance Portability and Accountability Act (HIPAA)
HIPAA enacted by Congress in 1996 amends the Employee Retirement and Income Security Act (ERISA). Title I of HIPAA provides protection to employees and their families when they change or lose health coverage from employment – introducing the concept of “portability” to health coverage. 

In addition, the law allows employer sponsored health plans to impose restrictions for up to 12-months for pre-existing conditions. However, this 12-month “waiting period” for coverage may be reduced by an employee’s “creditable coverage” from a prior employer. 

As with the COBRA law, HIPAA mandates certain notification and disclosure requirements involving health care portability – non compliance can result in significant fines and penalties enforced by the Department of Health and Human Services.  

HIPAA also provides for the protection of the confidentiality of participants’ medical information – termed “protected health information” or PHI. This is accomplished with Title II of HIPAA, enacting the Privacy Rule which took effect in 2003.

Title II of HIPAA also introduced the concept of national standards with regards to the transmission of electronic health records.

Additional Resources:
California Department of Managed Health Care – “Federal COBRA & Cal-COBRA”
U.S. Department of Labor – “FAQs About COBRA Continuation Health Coverage”
U.S. Department of Health & Human Services – “HIPAA – General Information”
U.S. Department of Health & Human Services – “Office for Civil Rights – HIPAA”

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