COBRA Notification

[Guest kp]

Employee transfers from parent to a wholly owned subsidiary. Both have group health plans that are comparable. Any COBRA notification necessary upon transfer? Cites?

[Guest sdussault]

The main question is whether the employee will be subject to a waiting period before coverage will become effective under the subsidary health plan. General COBRA law states that once covered under a "new" group health plan without restriction for pre-existing conditions, the former employee is no longer eligible for COBRA anyhow. Provided you simply transfer the employee, the new coverage is comparable, no pre-ex applies, and no waiting period is required, COBRA continuation would not apply. If the employee will have to go through the waiting period, then yes, the former (parent) employer will need to offer COBRA to the employee and dependents losing coverage.

------------------

[Guest HIPAAdrome]

Well, I think it's bit more complex than that. Remember that, after the Supreme Court's decision in Geissal and the new COBRA regulations, you cannot refuse to offer COBRA simply because the individual is covered under another group health plan prior to the date of the COBRA election.

Assuming the parent and the sub. each have separate health plans, I think there is a good argument that an employee terminating employment with the parent and thereby losing coverage under the parent's plan probably would be entitled to a COBRA election, even thought that may make little practical sense.

This is essentially a business decision. You can send the COBRA notice and cut off the possible penalties for not giving a COBRA notice. You would run the risk that the employee would elect COBRA and sign up for the sub's plan (esp. if he has a health problem). Or you can not send the COBRA notice and run the risk that the employee will figure it all out and sue you, or that the DOL or IRS will come knocking on your door.

[Brigid Anderson]

Nah, its more complex still. I agreee with the clarification that the QB must first become covered under the other plan AFTER the election--otherwise the other coverage can't form the basis for terminating COBRA rights. However, the other plan cannot be a plan maintained by the employer who maintains the COBRA plan (Prop. Treas. Reg. § 53.4980B-7, Q/A 2©, and employer typically includes all entities in the control group, (Prop. Treas. Reg. § 53.4980B-2, Q/A 2(a), which will certainly include the parent and a wholly-owned sub as in the original question.

But on a more basic levelshould we conclude, without knowing more facts, that there has been a termination of employment? The original question says "transfer;" what does that mean? To be a qualifying event triggering COBRA, there must be termination that causes a loss of coverage. Sounds like there was a loss of coverage, but was it caused by a termination? If the employer is defined to be the control group, then there has been no termination, no qualifying event and thus no COBRA.

[Guest robin]

My husband recently left a company and received his COBRA papers. The notification listed the option of taking medical, dental, and RX all together. His new job doesn't offer dental for 1 year, so I called to see if they would offer only the dental COBRA and they said that it was all one plan and couldn't be separated.

The problem is that it isn't one plan. The medical is an HMO and the Dental is through another carrier. Is this legal since they are two separate plans? I have always been under the impression that you must offer the COBRA for each plan seperately.

Any help you can give will be appreciated. I really don't want to wait an entire year for coverage. Thanks.

------------------

Robin

[Guest nac]

Yup, I think it's legal because of the definitions of core and non-core benefits, though HIPAAdrome probably could do the citations better.