What type of coverage must be offered under COBRA when an employee dro

[Guest SCUDDESLER]

Suppose an employee and his spouse are covered under an employer's insured group health plan for the plan year beginning January 1, 2000 and ending December 31, 2000. The employee and his spouse are in the middle of a divorce during the annual open enrollment period for the plan year beginning January 1, 2001 and the employee decides not to cover his soon-to-be ex-spouse. For plan years prior to January 1, 2001, the employer only offered group health care. However, for plan years beginning on and after January 1, 2001, the employer will offer group health care, dental care and vision care.

Assuming that the employer concludes that the employee is dropping his spouse from coverage "in anticipation" of a qualifying event (i.e. the divorce) so that the ex-spouse will be entitled to COBRA coverage beginning on the date of the qualifying event(the date of the divorce), what COBRA coverage must the employer offer the ex-spouse? Is the ex-spouse only entitled to group health coverage under COBRA since this is the coverage she had prior to the date she was dropped in anticipation of the divorce or is the ex-spouse entitled to group health, dental and vision coverage under COBRA since this is what the employer offers active employees at the time of the qualifying event?

[jeanine]

As far as I know, anticipation of divorce is not a qualifying event. If the employee does what you are stating, then the soon to be ex-spouse is without coverage for a length of time. At the time of divorce, there is no group coverage so even though there is a qualifying event, there's no COBRA because the QB is not covered under an employer group plan. As the soon to be ex-spouse, I would vigorously oppose being dropped from coverage. As the TPA, we wouldn't do it without the soon to be ex's consent. What does the STBES (soon to be)'s attorney say? We would point out that if the STBES has no coverage, until the divorce is final her medical expenses are marital debt. If she waits too long, she loses HIPAA eligibility status. We won't drop anyone without consent or a final divorce decree. So, to answer the rest of your question, if the STBES stays on coverage, after January 1, the STBES would have COBRA coverage that mirrors the new group coverage.

[Kirk Maldonado]

I believe that the regulations state that the event of dropping coverage in anticipation of a qualifying event occuring is disregarded, so that the ex-spouse can still elect COBRA coverage upon divorce. Look at the preamble to the regulations, I believe it is discussed in detail there.

[Guest KGibson]

Also check the group plan under eligibility. The soon to be ex may have lost eligibility once they filed for legal separation. That would have been a qualifying event. Health coverage falls under COBRA and so does flexible spending accounts. If they did not have a vision or dental plan prior to COBRA, it is not ususally offered. Even if they DID have vision and dental, it does not have to be offered under COBRA.

[Guest rcenturion]

The new Cobra regulations address this situation and state that the spouse that was dropped from the group health plan in anticipation of divorce will be entitled to Cobra coverage at the time of the divorce decree even though she was not enrolled in the group health plan immediately prior to the qualifying event.

[jeanine]

What happens to the spouse in the interim? If the spouse is dropped in anticipation, then incurs major medical expenses (such as open-heart surgery as in one instance I remember) these aren't covered retroactively once COBRA is elected. For this reason, even though the regs allow the spouse to elect upon divorce, we strongly discourage enrollees from doing this. Thanks all, for the heads-up on cites that address this issue as I was unaware of this provision.

[Guest rcenturion]

In the interim, the spouse would have no coverage. It is better to follow your practice of not allowing employees to drop a spouse during open enrollment without that's spouse's consent or knowledge, but I don't think most employers follow that practice. Before the new regs were adopted, the spouse that was dropped prior to a divorce would never be entitled to Cobra because he or she was not a participant in a health plan prior to the qualifying event.

[KIP KRAUS]

jeanine;

I would expect that the spouse may be eligible for a converted policy to cover him/her during the period before the COBRA event happens. Assuming, of course that a conversion policy is available. Otherwise it sure appears that the spouse would SOL in this situation unless his/her attorney was clever enough to find a way to prohibit the employee from dropping spousal coverage prior to the final divorce.

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[Guest rcenturion]

The big problem with an employee dropping their spouse from the health plan is that the dropped spouse sometimes doesn't find out that their coverage has been cancelled until they start receiving denied claims or collection letters.

[KIP KRAUS]

rcenturion

I would agree with you, but isn't there a requirement to give the canceled spouse a HIPAA notice of credible coverage when his/her coverage is canceled?

[Mary C]

Dropping in anticipation of a divorce is a very tricky situation. And since its happening at open enrollment when these types of changes are allowed, the employer has no way of knowing its in anticipation of the divorce unless they are specifically told. So all HIPAA notices, COBRA notices, or any notice regarding health care coverage is typically sent to the address of record - which is probably the employees home. The soon to be ex will have no way of knowing the coverage is dropped until they go to use it. Nor will most carriers recognize a voluntary cancellation (which is what dropping coverage on a dependent during open enrollment is) as a reason to offer conversion policies, if they have any (not all do). Buying a personal policy may be an option, but it wouldn't cover any expenses already incurred.

As to previous questions - In our experience, although a legal separation is a COBRA qualifying event, not all states (for example NJ) have or recognize legal separations.

[Guest rcenturion]

yes, the dropped spouse should get a certificate of coverage, but they might not receive it for 30-60 days after cancellation. also, the certificate may be sent to an old address if the spouses have separated.

[jeanine]

We have considered getting signed consent every time someone is dropped even during open enrollment. We always question when they are dropped outside of open enrollment, plus we have a few companies with known "rogue employees" who attempt to do this. While the reason for dropping a spouse before a divorce is final is often to punish or stick it to the spouse one last time, this is really a foolish thing to do. At least in Ohio, any debts the uncovered spouse incurs before the divorce are the debts of both spouses. I also believe an attorney could get a court order to stop the spouse from dropping, much the same way attorneys obtain orders prohibiting transfer of assests or beneficiary designations on life insurance before a final divorce decree.

[KIP KRAUS]

Good discussions, but I guess ol Uncle Sugar Daddy didn’t think about this scenario. I thought the government thought of everything to protect us from all evil wrongdoing.