COBRA for beneficiary who moves out of HMO service area

[Guest FAQ]

Reg. §1.4980B-5 Q/A-4(a) requires a group health plan to offer COBRA to a qualified beneficiary even if he moves out of an HMO's service region and the coverage ceases to be of value.

What if the HMO contract states not only that services outside the service region are not covered, but goes a step further and states that coverage itself terminates on the date a participant "no longer resides or works in the service area"? Is this allowed? This is a fine distinction, but the result seems to be that the participant cannot continue coverage and return to the service area for medical care, since he does not reside or work there.

The COBRA section of the HMO contract states that COBRA continuation coverage will end on "the date coverage would otherwise terminate under the policy." I do not see this as a reason to terminate COBRA coverage in IRC §4980B.

To add some facts, the company subject to the above provision has an employee who has elected COBRA and lives in the HMO service area, but is about to relocate out of the service area. The company needs to know whether his COBRA coverage continues after the move. The plan says it does not, since coverage would have otherwise terminated under the policy, but the Code and regs seem to indicate that he has the right to continue his coverage, even though it is of no value.

Thanks in advance for any thoughts!

[Kirk Maldonado]

For what it is worth, here are some notes that I had stored on my computer:

Employer was required to reimburse employee for medical expenses, even though employee was out of the service area of the HMO and the indemnity plan dissolved. Coble v. Bonita House, Inc., DC NCalif 3/25/92, 14 EBC 2824

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[Guest LFrankel]

We had a similar situation. Only the ex-employee had prior medical history and was attempting to get into a state insurance risk pool after relocating. The insurance carrier under which he had COBRA wrote a letter indicating the ex-ee would not have coverage if relocating (POS plan). Even with the POS plan, he would not have had routine treatment coverage as there was no service area.

Good authority on this topic is Thompson Publishing's Mandated Health Benefits: The COBRA Guide.