Cobra for actively covered open enrollment

[Insurnacegirl555]

If an active employee has medical coverage but does *not* qualify for coverage when its time for open enrollment, do they qualify for cobra offer?  In this case, the business is using the ACA one year lookback measurement to determine eligibility and the variable rate employee dropped to around 20 hr/week so they will not qualify for 2025 coverage.  But, they do have coverage currently.  Should a Cobra offer be made effective 1/1/25 in this scenario?  Or, is it not a qualifying event that they no longer qualify during open enrollment due to dropping under required number of hours?

[Brian Gilmore]

Yes, loss of coverage caused by a reduction in hours is a COBRA qualifying event.  That's also true if the reduction in hours causes the loss of coverage at the end of the applicable ACA look-back measurement method stability period. 

• More details: https://www.newfront.com/blog/the-cobra-triggering-events

It doesn't matter whether the employee is eligible for active coverage at that point.  By definition they aren't be eligible for active coverage, otherwise they wouldn't have lost it and had the qualifying event.  In other words, basically everyone on COBRA is no longer eligible to enroll in active coverage at open enrollment.

Here's a quick overview--

https://www.newfront.com/blog/loss-of-health-plan-eligibility-caused-by-move-to-part-time-work

Employees who do not average at least 30 hours of service over the full standard measurement period (i.e., generally do not reach 1,560 hours of service in the typical 12-month standard measurement period) can be removed from coverage as of the start of the new stability period (generally the start of the new plan year) because the employee will be treated as part-time for ACA purposes for the duration of that stability period.  This will be a COBRA qualifying event as of the end of the plan year in which the employee loses coverage (loss of coverage caused by a reduction in hours).

[Insurnacegirl555]

thank you!!

[Insurnacegirl555]

On 10/10/2024 at 5:46 PM, Brian Gilmore said:

Yes, loss of coverage caused by a reduction in hours is a COBRA qualifying event.  That's also true if the reduction in hours causes the loss of coverage at the end of the applicable ACA look-back measurement method stability period. 

• More details: https://www.newfront.com/blog/the-cobra-triggering-events

It doesn't matter whether the employee is eligible for active coverage at that point.  By definition they aren't be eligible for active coverage, otherwise they wouldn't have lost it and had the qualifying event.  In other words, basically everyone on COBRA is no longer eligible to enroll in active coverage at open enrollment.

Here's a quick overview--

https://www.newfront.com/blog/loss-of-health-plan-eligibility-caused-by-move-to-part-time-work

Employees who do not average at least 30 hours of service over the full standard measurement period (i.e., generally do not reach 1,560 hours of service in the typical 12-month standard measurement period) can be removed from coverage as of the start of the new stability period (generally the start of the new plan year) because the employee will be treated as part-time for ACA purposes for the duration of that stability period.  This will be a COBRA qualifying event as of the end of the plan year in which the employee loses coverage (loss of coverage caused by a reduction in hours).

Sorry, one last set of questions.  If medical is terminated 12/31/24 due to reduction in hours and new plan year starts 1/1/25. Will employee get cobra open enrollment docs? Or only regular cobra enrollment docs? If they get regular cobra enrollment docs does it list all the open enrollment plans for them to choose from but just on regular enrollment paperwork? If they get open enrollment docs, does it say 60 days on it instead of the usual smaller open enrollment window since they must have the full 60 days to make elections as newly qualifying? Or, do they somehow get both docs in the mail separately? If they get both, what options are even listed on the regular cobra enrollment since its the new plan year that the coverage would be for so they technically can change plan types/coverage? If they only get open enrollment documents, how do they get alerted that they have 60 days to decide since Cobra open enrollment doesn't normally allow for 60 days in the paperwork?  This is our first time having an employee who has lost coverage for hours reduction after the look back but we will likely have it happen many more times since we have a highly variable hour set of employees where dropping between over 30 and under 30 for the 1 year look back is not uncommon. 

[Brian Gilmore]

COBRA participants have the same OE rights as actives.  Nothing about OE rights changes the standard 60-day election period or 45-day period to make the first premium payment.  I'll defer to you and your COBRA TPA for the specific procedures of the distribution of materials and election process for your plan.

• More details: https://www.newfront.com/blog/open-enrollment-rights-for-fmla-leaves-and-cobra-participants-2

Slide summary:

2024 Newfront COBRA for Employers Guide

[Christine Oliver]

Do employers have to offer a new vision plan (effective 1/1/25) to all current COBRA participants or only to those who become COBRA participants following the implementation of this new plan offering?

 

[Brian Gilmore]

If it's replacing the current vision plan, I think it's clear you would have to offer it through COBRA per the plan modification rule below. 

If it's a new vision plan option in addition to what the employee was enrolled in while active, it's a bit less clear.  In that case you only have the right to continue coverage in effect at the time of the event, and you aren't considered a QB with OE rights until you reach the election period.  So if the OE occurs before the COBRA election period, it's something of a gray area because the individual is not a QB at the time of OE.  I would still offer the ability to change where possible, but it's not clear that's required.

More details:

https://www.newfront.com/blog/which-plan-options-must-be-offered-under-cobra-2

 

Exception #3: Plan Changes for Active Employees

If the employer changes plan coverage for active employees, the same changes will also apply to COBRA qualified beneficiaries. For example, if the employer changes its active health coverage from Anthem to Cigna, all COBRA participants will also have their coverage change to the new Cigna benefit package option.

...

Treas. Reg. §54.4980B-5:

Q-1. What is COBRA continuation coverage?

A-1. (a) If a qualifying event occurs, each qualified beneficiary (other than a qualified beneficiary for whom the qualifying event will not result in any immediate or deferred loss of coverage) must be offered an opportunity to elect to receive the group health plan coverage that is provided to similarly situated nonCOBRA beneficiaries (ordinarily, the same coverage that the qualified beneficiary had on the day before the qualifying event). See Q&A-3 of §54.4980B-3 for the definition of similarly situated nonCOBRA beneficiaries. This coverage is COBRA continuation coverage. If coverage is modified for similarly situated nonCOBRA beneficiaries, then the coverage made available to qualified beneficiaries is modified in the same way. If the continuation coverage offered differs in any way from the coverage made available to similarly situated nonCOBRA beneficiaries, the coverage offered does not constitute COBRA continuation coverage and the group health plan is not in compliance with COBRA unless other coverage that does constitute COBRA continuation coverage is also offered. Any elimination or reduction of coverage in anticipation of an event described in paragraph (b) of Q&A-1 of §54.4980B-4 is disregarded for purposes of this Q&A-1 and for purposes of any other reference in §§54.4980B-1 through 54.4980B-10 to coverage in effect immediately before (or on the day before) a qualifying event. COBRA continuation coverage must not be conditioned upon, or discriminate on the basis of lack of, evidence of insurability.

 

Slide summary:

2024 Newfront COBRA for Employers Guide

[Christine Oliver]

Thank you, Brian. This is a brand, new vision plan (never had one before) so we are not offering to current COBRA participants.