Voluntary drop of Group Coverage for Medicare-COBRA Event?

[Glynda Blakley]

Employee wants to voluntarily drop group health coverage mid plan year (remain an active employee) and enroll in Medicare. The employer allows for this as a Life Event for dropping coverage, but I don't believe this a COBRA event as it is a voluntary drop of coverage and not an actual COBRA event. This in turn will affect the employee's spouse/dependents. Because the CMS website is very generic in this response and my reference materials don't mention voluntary drop, I'm having difficulty in providing information that will satisfy the employee, client, etc. I did reference an old post on here regarding voluntary drop of coverage, but I need more. Any clarification or assistance is appreciated.

[Brian Gilmore]

That is not a COBRA qualifying event because the loss of coverage is not caused by a triggering event.  The MSP rules prevent Medicare eligibility from causing a loss of GHP eligibility in most situations.

There are two requirements for a COBRA qualifying event:

1.  Loss of group health plan coverage;
2.  Caused by a COBRA triggering event.

Not all losses of coverage are a COBRA qualifying event.  Qualified beneficiaries have COBRA continuation coverage rights only if they experience a qualifying event.  The event causing the individual’s loss of coverage must be one of the listed triggering events set forth by COBRA to constitute a qualifying event.

Any other cause of a loss of group health plan coverage will not give rise to the right to continue coverage through COBRA.  For example, an employee voluntarily dropping coverage for the employee and/or dependents at open enrollment or because of a mid-year permitted election change event is not a COBRA qualifying event.

Qualified beneficiaries technically experience a qualifying event if their loss of coverage is caused by the employee’s Medicare enrollment.  However, most employers (generally 20+ employees) are subject to the Medicare Secondary Payer rules that prohibit the employer from taking into account the Medicare entitlement of the employee.  Accordingly, in most situations the employee’s Medicare enrollment cannot cause the employee to lose coverage, and therefore cannot trigger COBRA rights.  

Treas. Reg. §54.4980B-4:

Q-1. What is a qualifying event?

A-1. (a) A qualifying event is an event that satisfies paragraphs (b), (c), and (d) of this Q&A-1. Paragraph (e) of this Q&A-1 further explains a reduction of hours of employment, paragraph (f) of this Q&A-1 describes the treatment of children born to or placed for adoption with a covered employee during a period of COBRA continuation coverage, and paragraph (g) of this Q&A-1 contains examples. See Q&A-1 through Q&A-3 of §54.4980B-10 for special rules in the case of leave taken under the Family and Medical Leave Act of 1993 (29 U.S.C. 2601-2619).

(b) An event satisfies this paragraph (b) if the event is any of the following—

(1) The death of a covered employee;

(2) The termination (other than by reason of the employee's gross misconduct), or reduction of hours, of a covered employee's employment;

(3) The divorce or legal separation of a covered employee from the employee's spouse;

(4) A covered employee's becoming entitled to Medicare benefits under Title XVIII of the Social Security Act (42 U.S.C. 1395-1395ggg);

(5) A dependent child's ceasing to be a dependent child of a covered employee under the generally applicable requirements of the plan; or

(6) A proceeding in bankruptcy under Title 11 of the United States Code with respect to an employer from whose employment a covered employee retired at any time.

(c) An event satisfies this paragraph (c) if, under the terms of the group health plan, the event causes the covered employee, or the spouse or a dependent child of the covered employee, to lose coverage under the plan. For this purpose, to lose coverage means to cease to be covered under the same terms and conditions as in effect immediately before the qualifying event.

 

Slide summary:

2023 Newfront COBRA for Employers Guide

[Glynda Blakley]

Thank you Brian. This is how I've always administered COBRA but could not find anything specific to back it up.

[Scott A. Davis]

Thanks, Brian,

This is also in the Model COBRA Continuation General Notice Model COBRA Continuation Coverage General Notice

What is COBRA continuation coverage?

....................................................................................................................................................................................................................................................

If you’re an employee, you’ll become a qualified beneficiary if you lose your coverage under the Plan because of the following qualifying events:

·        Your hours of employment are reduced, or

·        Your employment ends for any reason other than your gross misconduct.

If you’re the spouse of an employee, you’ll become a qualified beneficiary if you lose your coverage under the Plan because of the following qualifying events:

·        Your spouse dies;

·        Your spouse’s hours of employment are reduced;

·        Your spouse’s employment ends for any reason other than his or her gross misconduct;

·        Your spouse becomes entitled to Medicare benefits (under Part A, Part B, or both); or

·        You become divorced or legally separated from your spouse.

Your dependent children will become qualified beneficiaries if they lose coverage under the Plan because of the following qualifying events:

·        The parent-employee dies;

·        The parent-employee’s hours of employment are reduced;

·        The parent-employee’s employment ends for any reason other than his or her gross misconduct;

·        The parent-employee becomes entitled to Medicare benefits (Part A, Part B, or both);

·        The parents become divorced or legally separated; or    

The child stops being eligible for coverage under the Plan as a “dependent child.”

 

Some of the confusion is in the next statement:

When is COBRA continuation coverage available?

The Plan will offer COBRA continuation coverage to qualified beneficiaries only after the Plan Administrator has been notified that a qualifying event has occurred.  The employer must notify the Plan Administrator of the following qualifying events:

·        The end of employment or reduction of hours of employment;

·        Death of the employee;

·        [add if Plan provides retiree health coverage:  Commencement of a proceeding in bankruptcy with respect to the employer;]; or

·        The employee’s becoming entitled to Medicare benefits (under Part A, Part B, or both).