COBRA waivers

[Guest OSU]

Couple of questions. If a QB waives COBRA coverage, and then revokes the waiver, the employer can reinstate coverage on the day coverage is revoked. Is the employer required to administer in this manner, or can we retro-reinstate?

If we did reinstate on day waiver is revoked, this does not extend the end of their COBRA term, right?

Thx.

[jsb]

Except in very few instances (this not being one of them) COBRA should be effective on the day after the day that active coverage terminates, such that there is no break in coverage. Revoking a waiver would allow the person to accept the original offer under its original terms. Why would you only go back to the date that the waiver was revoked?

[Guest OSU]

The DOL model qual event letter states "If you reject COBRA continuation coverage before the due date, you may change your mind as long as you furnish a completed Election Form before the due date. However, if you change your mind after first rejecting COBRA continuation coverage, your COBRA continuation coverage will begin on the date you furnish the completed Election Form".

The issue is this. I have a person who has not incurred any claims and wants to reject COBRA so she can go back and elect and subsequently not have to pay back premiums. I've never run into this before. The regs don't appear to say that we MUST begin coverage on waiver revocation date, but just that we can.

Has anyone had this issue before?

[Guest llerner]

COBRA continuation always implies no break in coverage. The carriers require it regardless so they would not permit COBRA with a break between active and cobra status. When their active status changes to COBRA all retro premium must be made regardless if claims or not. COBRA enrollees already have higher claims payment than non-COBRA and already are considered adverse selection nightmare which is why many carriers limit the COBRA enrollees they will accept on a new quote and refuse to quote if more than 5 for example.

That is how COBRA works - no break in coverage is required from the date the coverage is terminated with the active status to the new COBRA status. The carrier would not accept the person otherwise nor are they required to do so. Just ask the carrier. Everyone would do what your client wants to do if this were the case.

Their coverage would not be extended and begins when the active coverage ends.

[Guest OSU]

Thanks. That was the answer I was hoping for.

Does the waiver really only come into play when a company has a standard waiver form they give to employees? Does the DOL require it to be in the qual event letter?

[Sandra Pearce]

Most employees do not even bother to send in a rejection. They simply ignore the COBRA election notice and if at a later date they accept (within the 60 day election period) the coverage must be retroactive to the date coverage was lost. The regulations simply allow you to not provide coverage for someone who has actually submitted a rejection of COBRA and then later (again within the 60 day period) changed their mind. Your election form must stipulate how you are going to handle this.

[Kirk Maldonado]

Q-4. Is a waiver before the end of the election period effective to end a qualified beneficiary's election rights?

A-4. If, during the election period, a qualified beneficiary waives COBRA continuation coverage, the waiver can be revoked at any time before the end of the election period. Revocation of the waiver is an election of COBRA continuation coverage. However, if a waiver of COBRA continuation coverage is later revoked, coverage need not be provided retroactively (that is, from the date of the loss of coverage until the waiver is revoked). Waivers and revocations of waivers are considered made on the date they are sent to the employer, employee organization, or plan administrator, as applicable.

Treas. Reg. § 54.4980B-6.

[Mary C]

I agree with Kirk. We've had this happen a few times and the regs specifically do allow for a break in continuous coverage if the prospective participant waives coverage then later elects during the 60 day election period. Coverage (and premiums) then begins when the election form is provided not at the end of active coverage. We contract with over 80 HMO's and have never had a problem with this once the Q&A Kirk cites is reviewed.

[jsb]

Mary C,

Do you then provide 18 months (or other appropriate length) of COBRA coverage from the date COBRA coverage begins, or do you count your 18 from the date active coverage ended (noting that the dates are different as you have laid out)?

If a break in coverage occurs, what is the effective date of the COBRA coverage - date of election, first day of the month following election, or other? I assume you still wait for payment before putting coverage in place?

[Mary C]

The 18 months of COBRA still runs from the event date. There is no coverage from the event date to the date the election is post marked. The participant begins paying from the effective date of coverage (post mark date). All other COBRA rules (45-day initial grace period, etc.) remain in place.