Change in Carrier Results in Loss of Coverage for Relocated COBRA Reci

[Christine Roberts]

Employer changes group health insurance carrier in California - new carrier does not offer coverage in Illinois, where former employees enjoy COBRA coverage with affiliate of prior carrier. My understanding is that, under Cobel v. Bonita House, 789 F.Supp. 320 (N.D.Ca. 1992), the employer must find "meaningful coverage" in Illinois, comparable to the California coverage, but that under the final COBRA regs there is no such obligation if the only coverage made available to active employees is not extendable to the relocated COBRA recipients. It is relevant if the COBRA recipient relocates before or after the change in coverage? Do any of you have experience w/a comparable situation?

[KIP KRAUS]

Christine;

Is the Insurer an HMO or PPO, or is the insurer writing an indemnity plan?

Some HMOs and PPOs have out-of-area riders to cover benefits recieved out of the HMO or PPO service areas. However, the coverage is typically more in the way of an indeminity type of coverage, i.e., deductibles and co-insurances.

In the case of a plan other than an HMO or PPO, it would seem that out-of-state benefits shouldn't be a problem. I don't think an insurer necessarily has to be admitted in the state of a person's residence in order to cover a person in his state of residence. They may not be able to situs the contract in Illinios, but they should be able to cover a person living in Illinois. Having said that, it may be that the insurer doesn't want to be subject to any extrataritorial Illinois state mandated coverages.

If there are enough COBRA participants (4 or 5 or more say) living in a common HMO area in Illinois the employer may look into purchasing a small local group contract to cover them. I'm not sure though if they would take only COBRA participants.

I guess I would want to know why the insurer is saying it can't cover a person living in Illinios. Do they cover persons in other states?

In any event, even though I'm not an attorney,I wouldn't want to be the one to try and justify a change in insurers when I knew all along that there were COBRA participants that may not be eligible for coverage.

[Guest jmcard]

I am very interested in the answer to this question. If an employer wants to change from a PPO to an HMO, the out-of-state COBRA beneficiaries will loose their coverage except for emergency. Many employers want to make this move. Is there a source that can clarify if the loss of coverage to the COBRA beneficiary is legal with this change?

[Christine Roberts]

A case from the Northern District of California (Coble v. Bonita House, 789 F. Supp. 320) (1992) seems to suggest that if the employer changes coverage AFTER the COBRA recipient relocates, the employer must provide comparable coverage even if it does not provide coverage to employees or COBRA recipients outside their service are.