Dropping COBRA Coverage

[Christine Roberts]

Terminated participant elects family coverage under COBRA

Later determines premiums are too expensive and wants to drop himself and a son from coverage, outside of open enrollment and not related to any change in status event.

Is this permissible?

From what I can gather, a COBRA election change (including dropping coverage) is limited to open enrollment and/or a change in status, ala Section 125 plans.

[KIP KRAUS]

Christine:

I am assuming that the COBRA participant wants to drop himself and son, but leave one person on COBRA coverage as a single participant? If this is the case, I agree with your interpretation.

However, in my opinion a COBRA participant can drop coverage entirely at any time.

He need only stop making payments and coverage will be canceled automatically.

They also shouldn’t be covered under Section 125.

Does this make sense?

[mroberts]

I concur with Kip. Employees who elect COBRA have the same rights to coverage as your regular employees and would therefore need to make changes at open enrollment. This employee could definitely decide to drop coverage altogether, but if he is trying to keep another dependent on, he will have to wait until your open enrollment period to do so.

[Sandra Pearce]

Our health plan does not have open enrollments. There are no requirements regarding when someone can drop coverage, other than those imposed on employees who are pre-taxing their premiums through our 125 plan. 125 rules would not apply to my COBRA participants. I would consider the family coverage election to be the same as each of the family members electing coverage and if one or more chose to drop I would allow that.

[jsb]

I'll agree with Sandra. As long as the dependent that wants to remain on the coverage would be a QB in their own right, we would allow that dependent to stay on, and let the others drop.

[mroberts]

Even if you have an open enrollment period?

[Sandra Pearce]

I'm not sure. Since I don't have them I don't think much about them other than when someone wants to drop coverage due to a spouse's open enrollment period. If each of the family members had elected coverage individually, which they had a right to, would you have put them together as COBRA family coverage or actually given each of them "employee" only COBRA coverage?

[jsb]

Whether or not they elected as a family or as individuals (we have both occur) we would ultimately look at each individual's QB status and allow them to maintain coverage. Lots of caveats here, though. For example, if the employee had 6 kids covered and wanted to drop only their own coverage, each of the kids would have to be enrolled as an individual, as none would have dependency status (to qualify as a family) in relation to the other minors. On the other hand, a spouse and child(ren) who wanted to remain on the plan after the (former) employee drops coverage could be either a family, or enroll separately as individuals, which some will do if it is financially advantageous.

[mroberts]

Since the employee in this example elected family coverage when going on to COBRA and since the company has an open enrollment period, I am sticking to my guns and feel that changes should only be allowed during the open enrollment period as designated by the employer or if another qualifying event were to occur. The employee obviously had to know the costs going in.

Furthermore, if you standardly allowed changes like this, your medical plan costs are going to increase more than normal since it's pretty obvious the wife is staying on because she needs some form of medical treatment. At least you can recoupe premium from the two healthy bodies for the rest of the year to offset any damage she is doing to your experience.