COBRA _ Individual Elections

[KIP KRAUS]

Final Regs. 54.4980B-6 Q&A 6

States that “each qualified beneficiary must be offered the opportunity to make an independent election to receive COBRA continuation coverage.”

In a scenario where an employee who covers his spouse only as a dependent and the employee terminates employment, can the spouse and the employee elect to be covered separately under single COBRA coverage as apposed to jointly under family coverage? Single coverage for each would be the cheapest way to obtain COBRA coverage.

Some insurers are saying they cannot elect single coverage on an individual basis, but must be covered by a family contract (or two-person contract). My contention is that they should be allowed to have single coverage, because of the above referenced Q&A 6.

Anyone have a decision on this?

[Guest BENEFISH]

Kip, I'm a little surprised that BMI Audit Services, Gwen, Linda, or the plethera of other lawyers and COBRA luminaries haven't answered you on this issue.

Tricky issue you have here, Kip. I can see your point and know of several plans that allow such separate elections and separate premiums. Each qualified beneficiary, which includes all covered persons at the time of a qualifying event, may elect coverage which is identical to that provided to active "employees". Thus it appears that the spouse in your example should be allowed to elect the same coverage as an active employee, not the same coverage as the spouse of an active employee. The decision you are looking for was issued by the IRS in Revenue Ruling 96-8. According to that ruling, if the premium structure is "employee only" or "employee and family", "the plan will not fail to meet the COBRA continuation requirements merely because it, in good faith, requires that two qualified beneficiaries receiving COBRA continuation coverage with respect to the same qualifying event jointly pay up to 102% of the family rate."

For what it's worth, even though the insurance company may have tripped over the right answer in this case, I still believe that anybody out there who is relying on insurance companies and/or TPAs for technical support related to COBRA is asking for trouble. They are like a (bene)fish out of water.

[KIP KRAUS]

Benefish:

Thanks for your response and the Revenue Ruling reference. I will read it as soon as I get a chance.

By the way, I agree with you about relying on insurance companies for COBRA information. I have talked to many people envolved in benfits and found that insurers often times give out wrong COBRA advise. That's why I questioned their refusal to allow COBRA eligiblles to select individual coverage rather than family coverage. They tend to make their decisions based on revenue rather than participant needs. I sold group insurance for a major carrier for two years and know their mentality well.

Thanks again for your response.