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COBRA Coverage Required?


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We have a couple former employees who are in our medical plan because they left on Long Term Disability -- our medical plan says former employees on LTD remain eligible.  The medical plan is being amended to no longer cover employees on LTD.  Normally, this wouldn't trigger COBRA, but, since we never offered COBRA when these employees initially left employment, do we need to offer them COBRA now?  Thank you!

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I am a little confused, are the 2 employees still on your medical plan?  Your first sentence states the employees are currently covered by your medical plan.  Your last sentence states you never offered them COBRA, which would only occur is they were leaving the medical plan.  

COBRA is for employees who lose medical coverage.  If the are on disability and still covered by the medical plan, you will need to offer them COBRA when they have a qualifying event and exit the medical plan.

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2 hours ago, ERISA-Bubs said:

We have a couple former employees who are in our medical plan because they left on Long Term Disability -- our medical plan says former employees on LTD remain eligible.  The medical plan is being amended to no longer cover employees on LTD.  Normally, this wouldn't trigger COBRA, but, since we never offered COBRA when these employees initially left employment, do we need to offer them COBRA now?  Thank you!

COBRA requires a loss of coverage on account of a qualifying event. The qualifying event is the termination of employment (you said former employees). That by itself does not trigger COBRA unless there is a loss of coverage. The loss of coverage will occur on the effective date of the plan amendment, and that will trigger COBRA.

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@ERISA-Bubs  A COBRA qualifying event occurs where a COBRA-prescribed triggering event causes a loss of coverage.  Amendment of the plan to eliminate coverage for certain employees who were previously eligible is not one of those triggering events.  See Treas. Reg. §54.4980B-4, Q/A-1.

I think the point of @B. PARVARANDEH is that the deferred loss of coverage rule should apply. In other words, that COBRA should be triggered on a delayed basis because the loss of coverage was constructively caused by the reduction in hours (i.e., the disability).  This would apply as long as the loss of coverage occurs within the 18-month period following the triggering event (reduction in hours).

The deferred loss of coverage rule would provide that the additional period of coverage continued after the triggering event (I'm assuming reduction of hours) would apply toward the COBRA maximum coverage period to reduce the period that the qualified beneficiary could continue coverage through COBRA.  See Treas. Reg. Sec. 54.4980B-4, Q/A-1(c).

That would mean the COBRA maximum coverage period would be 18 months reduced by the period in which active coverage continued prior to this amended to eliminate active coverage eligibility for LTD participants.

This example from the regs seems to be on point for that position:

Treas. Reg. Sec. 54.4980B-4, Q/A-1(g), Example 5:

Example (5). (i) An employer maintains a group health plan for both active employees and retired employees (and their families). The coverage for active employees and retired employees is identical, and the employer does not require retirees to pay more for coverage than active employees. The plan does not make COBRA continuation coverage available when an employee retires (and is not required to because the retired employee has not lost coverage under the plan). The employer amends the plan to eliminate coverage for retired employees effective January 1, 2002. On that date, several retired employees (and their spouses and dependent children) have been covered under the plan since their retirement for less than the maximum coverage period that would apply to them in connection with their retirement.

(ii) The elimination of retiree coverage under these circumstances is a deferred loss of coverage for those retirees (and their spouses and dependent children) under paragraph (c) of this Q&A-1 and, thus, the retirement is a qualifying event. The plan must make COBRA continuation coverage available to them for the balance of the maximum coverage period that applies to them in connection with the retirement.

I suggest confirming with your carriers (fully insured) and/or stop-loss providers (self-insured), but that is the position I would take.

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