COBRA - Open Enrollment

[Guest mls]

Our active employees are allowed to elect, cancel or change medical/dental benefits during each open enrollment period. So for example, if I only have dental coverage and I want to add medical, I can do so during open enrollment. Everything I have read about COBRA participants says they have to be treated the same as active beneficiaries. So we allow them during open enrollment to elect benefits they may not have had when their qualifying event occurred. Now I am reading through some notes from a seminar that says that "you do not have to allow COBRA participants to enroll in a plan during open enrollment which they did not have at qualifying event." Any comments? Are we required to offer the other plans? It would be much easier and less costly not to allow them to add new plans.

[Guest ScottN]

It's easy to remember when you think of COBRA as a continuation of coverage. In other words, if they did participate in a specific type of coverage at the time of the qualifying event, you do not have to offer it to them since it is not there to continue. Likewise, if they had coverage only for the employee and not the spouse or child(ren), you do not have to offer coverage to those dependents.

[KIP KRAUS]

I agree with scottN. However, if you have more than one medical plan and COBRA medical coverage is elected, at open enrollment the COBRA participant has the same option to switch to a different medical plan on the same basis as an active employee. On the other hand, if a person does not elect, for instance, dental COBRA coverage then he cannot elect dental coverage at open enrollment. The same would hold true if medical was not elected.

[Guest Gwen Vample]

You should check the IRS final COBRA rules on this issue (Section 54.4980B-5, Question 4©. The rules state that COBRA qualified beneficiaries have the same open enrollment rights as similarly situated employees who have not had a qualifying event. And the rules define an open enrollment period as one in which an employee can choose to be covered under another plan or benefit package, or add or eliminate coverage of family members. In essence, QBs could add new benefits they did not have before during open enrollment, just as an active employee would.

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Gwen Vample, editor

Mandated Health Benefits The COBRA Guide

Thompson Publishing Group

[Guest ScottN]

I stand corrected. After re-reading the regs it appears COBRA gives a continuation of rights not a continuation of coverage.

[KIP KRAUS]

I totally disagree with Gwen. Even though the her reference to the regs is correct, if person does not elect coverage, he or she forfeits the right to elect it later even if there is an open enrollment that allows employees to pick up coverage previuosly refused. In addition, COBRA election is only for coverage in effect at the time a person has a qualifying event, so how can a person later becoame eligible for COBRA coverage? Until I see a ruling on this subject, i will continue to disallow a COBRA participant to pick up a coverag that he/sahe was not enrolled in at the time of the qualifying event. Don't you think this government fiasco is getting a little ridiculous?

While I'm on the soap box, let me say that any dental plan that allows employees to pick up coverage after having initially refused it should only allow preventive services to such a person during the first 12 months of his/her coverage to avoid having them pick up the coverage for major foreseeable dental work.

[Guest mls]

The regs need to specifically detail open enrollment options available to a COBRA participant. Right now, as Gwen mentioned, the regs say you must treat a COBRA participant the same as an active benefit plan participant. That statement says to me, if I let active participants enroll in a plan they didn't have before open enrollment, that I must allow COBRA participants to as well. Just an FYI, we don't have hardly anyone pick up coverage they didn't have. Most folks on COBRA just continue with their same coverage. How can we get a clarification in the regs on this?

[KIP KRAUS]

I agree that the regs. say to treat COBRA participants the same as employees with regard to Open Enrollment. However, I would argue that this portion of the regs. applies to allowing COBRA participants to select from various medical or dental plan options once they are enrolled in one of those COBRA medical and/or dental plans. I would also argue that a person is not a COBRA participant if the person never elects COBRA coverage in a particular plan and therefore is not eligible to do so at open enrollment.

What if an employee elects COBRA dental only and then after finding out that he/she has to have major surgery sometome near Open Enrollment? Do you allow that person to take the medical coverage that was not initially elceted only so the surgery will be covered? I know I wouldn't. I guess the only way to find out the IRS's position on this is to ask them for clarification in writing.

Maybe someone out there will.

[Guest mls]

Kip - Yes, this is more costly to us, but we would allow an active employee who had to have an expensive surgery elect medical during open enrollment just to have the surgery covered. I would prefer not to offer the additional plans...

[Guest Gwen Vample]

Yes, an ideal solution would be a clarification from the IRS. Note that the regs use an example that four family members each elect COBRA coverage after a termination of employment. Three months later "there is an open enrollment period during which similarly situated active employees are offered an opportunity to choose to be covered under a new plan or to add or eliminate family coverage. During the open enrollment period, each of the four qualified beneficiaries must be offered the opportunity to switch to another plan (as though each qualified beneficiary were an individual employee."

The phrases "covered under a new plan" and switch to another plan" are key and, as written, appear open to broad interpretation. And note that in several areas of COBRA, QBs are given equal and in a few cases, greater rights than active employees.

[KIP KRAUS]

Gwen:

I totally agree COBRA participants, if in a COBRA medical plan, may choose to be enrolled in one of the othe company offered medical plans. I also agree that each COBRA participant has a separate/individual option to choose which plan to be enrolled with.

I would still argue that the regs. do not intedn to allow COBRA participants to elect types of coverages that they did not initially elect or that they were not covered by at the time of the qualifying event, i.e. If the employer has separate and distinct medical plans and a dental plan, and the eligible person enrolls in COBRA medical and not in COBRA dental then he or she is never eligible to pick up the dental coverage at open enrollment or at any time. Otherwise, why would the regs. say that a person must be enrolled in coverage immediately prior to the qualifying event in order to have COBRA rights?

Ever since COBRA has been in existense, the employers I have worked for have allowed COBRA participants to change their medical coverage at open enrollment. It only makes since to do so, but to allow them the enroll in a coverage that they did not initially elect is redicules. If the IRS is aying that this should be allowed, I suggest we all fight it. Is the IRS that inept? Maybe!!!

[Guest ScottN]

Yes, the IRS is that out of touch with reality. Unfortunately, it appears the COBRA regs keep getting more and more detrimental to the businesses offering coverage. I agree that the dental plans should only cover preventive in the first 12 months if COBRA coverage was not elected at the initial qualifying event. This probably contributes to the reason more and more fully insured plans are not covering anything but preventive for those not having comparable coverage for the 12 months preceding enrollment.

I did call two carriers and a COBRA TPA and was told they use procedures that do allow Cobra participants to add dependents or coverages at open enrollment.

In the spirit of treating them exactly like active employees, can we make attendance at open enrollment benefits meetings mandatory for COBRA participants as well? They probably have to be able to consume the doughnuts and coffee too!!?!?

[Guest nb]

We have mandatory enrollment for all employees, no waiver possible. For COBRA participants they can continue any plan they are enrolled in at the time of the qualifying event. If they do not continue a plan, they are not allowed to pick it up in the future at an open enrollment.

Question did arise when a new benefit was offered to employees, a flex spending account, whether we had to offer it to existing COBRA participants.

Comments please and recommendations.

[Guest mls]

If we offer a new plan to an active employee, we offer to COBRA participants as well (based on the conversations above about treating COBRA folks the same). But you do not have to allow them to enroll in the medical FSA if they are already on COBRA. The reason being, the FSA is a pre-tax plan. Once on COBRA, the participant is paying after-tax premiums plus two percent admin fee. Since the cost for them to participate in the FSA on COBRA is more than the benefit they would receive, the regs say you do not have to allow them to enroll.

[Guest ScottN]

My understanding is the participant must have a positive account balance at time of termination to be eligible for continuation. The continuation could then go through the end of the FSA plan year.

[Guest Keddy Long]

mistake, sorry!

[This message has been edited by Keddy Long (edited 09-25-1999).]

[PhilB]

I'm resurrecting this post because I'm looking for feedback on a twist to this situation. An employee and his spouse were in the process of getting a divorce. At open enrollment time, they were still married and he enrolled her in the medical plan, but not dental or vision. Now the divorce is finalized and she's just discovered that he never enrolled her in the other coverages. My understanding is that for the purpose of her intial COBRA notification, we only need to offer her the chance to continue her medical coverage. However, at open enrollment next fall, does my company need to offer her the option of electing dental and vision coverage in addition to selecting her medical coverage option? She certainly believes she should be able to, since she had no say in whether she had the coverage last time around. Thoughts?

[KIP KRAUS]

Because she wasn't enrolled in dental or vision I would'nt allow her to enroll in them at open enrollment.

[jeanine]

If any of you subscribe to Thompson Publishing Group's COBRA guides, the May 2002 Update addresses this exact same situation. They state "although it is not clear from the statute, the legislative history and IRS final regulations clearly indicate that qualified individuals have the same rights to change their coverage during open enrollment periods as active employees." If an active employee can add a coverage, such as dental, then the QB must be able to do the same.

[PhilB]

I found the same sentiment in the EBIA COBRA manual after I posted. Specifically, it says:

"The regulatory definition of "open enrollment period" also clearly allows QB to switch to other group health plans of the sponsoring employer at open enrollment. The final regulations do not distinguish between types of plans for purposes of the general rule giving QB the right to change coverage at open enrollment (Treas. Reg. 54.4980B-5, Q/A-4©). Although one could infer that the IRS anticipated only switching between plans of the same type (i.e. one medical plan for another - Treas. Reg. 54.4980B-5, Q/A-4(d), Example 1), the wiser conclusion is to apply the general rule without limiting it based on the types of plans involved."

I'm not sure how "wise" this conclusion is - after all, you open the plan up to additional liability for those who previously waived medical coverage selecting against the plan at open enrollment if they have costly health issues arise. But perhaps one could argue that it is "prudent" given the ambiguity of the regs. on this particular point.

[KIP KRAUS]

I would still argue that if these plans a clearly separate plans then open enrollment does not apply to any medical plan (what ever definition you want to give to a medical plan) that a QB was not enrolled in at termination of coverage. If the IRS intended to allow QBs to chose separate and distinct plans that they were not originally enrolled in I think they may be smart enough to clarify their position. Of course as I’ve said before, do any of the IRS employees really understand welfare benefits?

I would not allow a QB to elect coverage that he/she had not been enrolled in. Changing between medical plans clearly is their option.