COBRA in Asset Deal

[Chaz]

Seller is selling its assets to Purchaser. Seller maintains a insured medical plan with a high deductible and copayments, which plan will terminate upon the closing of the transaction. Purchaser will be a "successor employer" under COBRA.

Purchaser maintains a self-insured medical plan for similarly situated employees with three different plan design options. None of the options are similar to Seller's plan, although one of them has a higher deductible than the others.

Can Purchaser require QBs who continue coverage to enroll in the plan with a higher deductible?

Alternatively, can Purchaser set up a new self-insured plan option that has the same deductible and copayments, etc. as the Seller's plan for just the QBs?

[leevena]

The buyer is required to make available it's their current plan to the cobra population. They are not required to develop or obtain something new for them.

As for setting up a new and separate plan, not sure why they would want to do this, unless there is a very large amount. Doubt very much if you could obtain a fully-insured quote, so self-funding would be the way to go if you could find the reinsurance and the size made sense.

[Chaz]

Which one (or ones?) of the existing medical options must the purchaser make available to the COBRA population?

[MARYMM]

Which one (or ones?) of the existing medical options must the purchaser make available to the COBRA population?

All of them - if they are all available to active employees. COBRA beneficiaries have to be offered the same options (and enrollment/change rights) as active employees.

[Chaz]

Which one (or ones?) of the existing medical options must the purchaser make available to the COBRA population?

All of them - if they are all available to active employees. COBRA beneficiaries have to be offered the same options (and enrollment/change rights) as active employees.

I'm not talking about open enrollment, which I know the rule is that COBRA participants must be permitted to enroll in any benefit open to other similarly situated employees. That aside, ordinarily, COBRA coverage must be "identical" to what the QB has prior to the QE. In a transaction where the seller's plan goes away, there is no "identical" coverage under any of the purchaser's plans.

What am I missing?

[lvena]

Which one (or ones?) of the existing medical options must the purchaser make available to the COBRA population?

All of them - if they are all available to active employees. COBRA beneficiaries have to be offered the same options (and enrollment/change rights) as active employees.

I'm not talking about open enrollment, which I know the rule is that COBRA participants must be permitted to enroll in any benefit open to other similarly situated employees. That aside, ordinarily, COBRA coverage must be "identical" to what the QB has prior to the QE. In a transaction where the seller's plan goes away, there is no "identical" coverage under any of the purchaser's plans.

What am I missing?

Sorry for delay. The new employer does not have to offer an identical plan. They make available their current plan.

[Chaz]

Not to beat a dead horse, but what if the Purchaser's "current plan" has several different medical benefit options. For example, presume it offers its active employees a choice of a high deductible plan, a low deductible plan, and an HMO. Which option must it make available to the COBRA participants coming over from the Seller?

[leevena]

Not to beat a dead horse, but what if the Purchaser's "current plan" has several different medical benefit options. For example, presume it offers its active employees a choice of a high deductible plan, a low deductible plan, and an HMO. Which option must it make available to the COBRA participants coming over from the Seller?

Asssuming none of these plans are closed to new enrollment, the purchaser can offer all of them.

[Chaz]

Asssuming none of these plans are closed to new enrollment, the purchaser can offer all of them.

I'm really asking whether the Purchaser can limit COBRA participants to one of the options.

[leevena]

Asssuming none of these plans are closed to new enrollment, the purchaser can offer all of them.

I'm really asking whether the Purchaser can limit COBRA participants to one of the options.

Oh, sorry but I can be a little slow on the uptake. Hate to be somewhat vauge, but the employer may or may not be able to do what you are describing. Employers can restrict enrollment into certain health plan but it has to be done legally. If you differentiate between groups of similarly situated employees for the health plan, it must be based on legally defined employement-based classifications. These include part time, full time, doh's, lenght of services, geo areas, etc.

Now, if this employer can structure these people (which I doubt from what you have said so far) they can limit the plan offerings. My guess is that the employer cannot, so you will need to offer all.