COBRA Continuation Coverage COBRA Continuation Coverage Kathleen A. Harrison Resident Benefit Manager UB Office of Graduate Medical Education May 11, 2011

Background What is COBRA Continuation Coverage and what does it do? ◦Consolidated Omnibus Budget Reconciliation Act of 1986 ◦Provides temporary continuation of group health plan coverage that would otherwise end due to a life event known as a “qualifying event” ◦Identical coverage and rights as those provided to other participants or beneficiaries covered under the Plan who are not receiving COBRA coverage ◦Available for purchase at group rates plus a 2% administrative fee

Applicable Benefit Programs To which UMRS/UDRS group benefit programs does COBRA apply? ◦Medical Benefits Program ◦Dental Benefits Program ◦Health Care Flexible Spending Account Program  Available only to certain qualified beneficiaries and for a limited period

Eligibility Who is Eligible for COBRA? ◦Qualified Beneficiaries who lose coverage as a result of a qualifying event are entitled to elect COBRA. Qualified Beneficiaries ◦Qualified Beneficiaries include the following if he or she is covered under the group health benefit program on the day before the qualifying event:  The covered employee  The spouse of the covered employee (defined under Federal Law and/or the Plan)  Each dependent child of a covered employee (as defined by the Plan) ◦Domestic partners, same-sex spouses and non-dependent children are not eligible for COBRA coverage. Under the UMRS/UDRS group health plan, however, continuation coverage identical to that offered under COBRA is available for same-sex spouses provided they meet all other eligibility requirements.

Eligibility Qualified Beneficiaries Contd.  A child born to, adopted by, or placed for adoption with a covered employee during a period of COBRA coverage is considered to be a qualified beneficiary provided that: ◦ the covered employee is a qualified beneficiary ◦ the covered employee has elected COBRA coverage for himself or herself ◦ the child satisfies the otherwise applicable Plan eligibility requirements (for example, regarding age).  A child of the covered employee who is receiving benefits under the Plan pursuant to a qualified medical child support order (QMCSO) received by the Plan Administrator during the covered employee’s period of employment is a qualified beneficiary

Health Care Reform and COBRA Eligibility How does recent health care reform legislation affect COBRA eligibility? ◦The Patient Protection and Affordable Care Act (PPACA) as amended by the Health Care and Education Reconciliation Act requires group health plans to extend dependent children eligibility to age 26 effective with the first plan year renewal that begins on or after September 23, For the UMRS/UDRS group health plan, this effective date is July 1, ◦Plan participants who terminate coverage before July 1, 2011 will be able to enroll their dependent children ages in the plan under the special enrollment rule, provided the participant also enrolls for COBRA. ◦Unlike the dependent children who were covered under the plan prior to the employee’s termination of employment, these dependent children would not be considered qualified beneficiaries with independent rights to elect COBRA. ◦Because these dependent children would not be considered qualified beneficiaries, they would also not be eligible to extend COBRA through a second qualifying event, such as a subsequent divorce or death of the former employee parent.

Qualifying Events What is a COBRA Qualifying Event?  COBRA qualifying events are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are, plan notification requirements and the amount of time that a plan must offer the health coverage to them under COBRA.  COBRA qualifying events for employees are: ◦ Voluntary or involuntary termination of employment for reasons other than gross misconduct ◦ Reduction in the number of hours of employment

Qualifying Events COBRA Qualifying Events Contd.  COBRA qualifying events for spouses are: ◦ Voluntary or involuntary termination of the covered employee’s employment for reasons other than gross misconduct ◦ Reduction in the hours worked by the covered employee ◦ Covered employee’s becoming entitled to Medicare ◦ Divorce or legal separation from the covered employee ◦ Death of the covered employee  COBRA qualifying events for dependent children are the same as for spouses with one addition: ◦ Loss of dependent child status under the plan rules

COBRA Benefits Under COBRA, what benefits must be covered? ◦Qualified beneficiaries must be offered coverage identical to that available to similarly situated beneficiaries who are not receiving COBRA coverage under the plan. Generally this is the same coverage that the qualified beneficiary had immediately before qualifying for continuation coverage. ◦Any change in benefits under the plan for active employees will also apply to qualified beneficiaries. ◦Qualified beneficiaries must be allowed to make the same choices given to non-COBRA beneficiaries under the plan, such as open enrollment and special enrollment rights.

Duration of COBRA Coverage How long does COBRA coverage last? ◦The maximum coverage period is 18 months if the qualifying event is:  Termination of the employee’s employment  Reduction in the employee’s hours ◦The maximum coverage period is 36 months if the qualifying event is:  Death of Employee  Divorce  Cessation of dependent child status ◦For Health Care FSA’s, the maximum coverage period is through the end of the plan year during which the election was made.

Duration of COBRA Coverage Under what circumstances can COBRA coverage be extended? ◦Extension due to disability  If a qualified beneficiary is determined by the Social Security Administration to be disabled and the COBRA Administrator is notified of the disability in a timely fashion, all qualified beneficiaries may be entitled to receive up to an additional 11 months of COBRA coverage, for a total maximum of 29 months.  This extension is available only for qualified beneficiaries who are receiving COBRA coverage because of a qualifying event that was the covered employee’s termination of employment or reduction of hours.  In order to qualify for this extension, the disability must have started at some time before the 61st day after the covered employee’s termination of employment or reduction of hours and must last at least until the end of the period of COBRA coverage that would be available without the disability extension (generally 18 months, as described above).  Each qualified beneficiary who has elected COBRA coverage will be entitled to the disability extension if one of them qualifies.

Duration of COBRA Coverage ◦Extension due to covered employee’s Medicare eligibility  If an employee becomes entitled to Medicare benefits less than 18 months before the date of the qualifying event (i.e. termination of employment) COBRA coverage for qualified beneficiaries (other than the employee) who lose coverage as a result of that qualifying event can last until up to 36 months after the date of Medicare entitlement. ◦Extension due to occurrence of a second qualifying event  An extension of coverage will be available to spouses and dependent children who are receiving COBRA coverage if a second qualifying event occurs during the 18 months (or, in the case of a disability extension, the 29 months) following the covered employee’s termination of employment or reduction of hours.  The maximum amount of COBRA coverage available when a second qualifying event occurs is 36 months. ◦Notice Procedures  All extensions of COBRA coverage are subject to notice procedures as outlined in the Important Information About Your Coverage Rights section of the initial COBRA mailing.

Early Termination of COBRA Coverage Under what circumstances will my COBRA coverage terminate prior to the end of the maximum coverage period? ◦COBRA coverage will automatically terminate before the end of the maximum period if:  any required premium is not paid in full on time  a qualified beneficiary becomes covered, after electing COBRA, under any other group health plan that is not maintained by the employer and does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary  a qualified beneficiary becomes entitled to Medicare benefits (under Part A, Part B, or both) after electing COBRA  the employer ceases to provide any group health plan for its employees  during a disability extension period, the disabled qualified beneficiary is determined by the Social Security Administration to be no longer disabled (COBRA coverage for all qualified beneficiaries, not just the disabled qualified beneficiary, will terminate)  for any reason the Plan would terminate coverage of a participant or beneficiary not receiving COBRA coverage (such as fraud)

Electing COBRA Coverage How do I elect COBRA coverage? ◦To elect COBRA, you must complete the appropriate Election Form included in your COBRA mailing according to the directions in the mailing and deliver it to the COBRA Administrator by the date specified in your COBRA mailing. ◦Under federal law, qualified beneficiaries have 60 days after the date of the COBRA notice (or, if later, 60 days after the date group health program coverage is lost) to decide whether they want to elect COBRA coverage under the Plan. ◦COBRA is elected on the date your Election Form is postmarked, if mailed, or the date your Election Form is received by the individual at the address specified for delivery of the Election Form, if hand-delivered. ◦Election forms must be mailed or hand-delivered. Oral communications regarding COBRA coverage, including in-person or telephone statements about an individual’s COBRA coverage will not preserve COBRA rights. Electronic ( ed) communications are not acceptable.

Electing COBRA Coverage How do I elect COBRA coverage? cont’d. ◦If a completed COBRA Election Form is not postmarked or hand delivered within the 60 day time frame, all rights to elect COBRA continuation coverage are lost. ◦If COBRA continuation coverage is rejected before the due date, a qualified beneficiary may change his/her mind as long as a completed COBRA Election Form is furnished before the due date. However, if a qualified beneficiary changes his/her mind after first rejecting COBRA continuation coverage, the COBRA continuation coverage will begin on the date the completed Election Form is furnished. ◦Each qualified beneficiary has a separate right to elect COBRA. ◦COBRA may be elected for only one, several, or for all dependent children who are qualified beneficiaries.

Paying for COBRA Coverage How much does COBRA cost? ◦Current monthly premiums (through June 30, 2010) are as follows:  Medical POS Plan (in WNY) ◦ UMRS Single: $381.00UMRS Family: $ ◦ UDRS Single: $384.00UDRS Family: $  Medical PPO Plan (outside WNY) ◦ UMRS Single: $612.00UMRS Family: $1, ◦ UDRS Single: $1,211.00UDRS Family: $3,  Dental Plan ◦ UMRS Single:$21.00UMRS Family: $47.00 ◦ UDRS Single:$13.00UDRS Family: $28.00  Health Care FSA ◦ Current monthly contribution + 2% (post tax)

Paying for COBRA Coverage How much does COBRA cost? cont’d ◦ monthly premiums (July 1, 2011 through June 30, 2012) are as follows:  Medical POS Plan (in WNY) ◦ UMRS Single: $380.00UMRS Family: $ ◦ UDRS Single: $395.00UDRS Family: $  Medical PPO Plan (outside WNY) ◦ UMRS Single: $636.00UMRS Family: $1, ◦ UDRS Single: $1,184.00UDRS Family: $3,  Dental Plan ◦ UMRS Single:$22.00UMRS Family: $50.00 ◦ UDRS Single:$12.00UDRS Family: $27.00  Health Care FSA ◦ Current monthly contribution + 2% (post tax)

Paying for COBRA Coverage When and how must the first payment for COBRA coverage be made? ◦If COBRA is elected, qualified beneficiaries are not required to send any payment with the Election Form. ◦The first payment for COBRA coverage must be made no later than 45 days after the date of the election.  This is the date your Election Form is postmarked, if mailed, or the date your Election Form is received by the individual at the address specified for delivery of the Election Form, if hand-delivered  If the first payment for COBRA coverage is not made in full within 45 days after the date of the election, all qualified beneficiaries for whom COBRA coverage was elected will lose all COBRA rights ◦The first payment must cover the cost of COBRA coverage from the time the coverage under the Plan would have otherwise terminated up through the end of the month before the month in which you make your first payment.  Qualified beneficiaries are responsible for making sure the amount of their first payment is correct

Paying for COBRA Coverage When and how must subsequent payments for COBRA coverage be made? ◦After the first payment for COBRA coverage is made, qualified beneficiaries will be required to make monthly payments for each subsequent month of COBRA coverage based on the monthly premium information provided. ◦Each monthly payment for COBRA coverage is due on the first day of the month for that month’s COBRA coverage. ◦The COBRA Administrator is not required to and will not send periodic notices of payments due for these coverage periods; it is the qualified beneficiary’s responsibility to pay the COBRA premiums on time. ◦All COBRA premiums must be paid by check or money order payable to UMRS or UDRS.

Paying for COBRA Coverage Are there grace periods for monthly payments? ◦Although monthly payments are due on the first day of each month of COBRA coverage, a grace period of 30 days is given after the first day of the month to make each monthly payment. ◦COBRA coverage will be provided for each month as long as payment for that month is made before the end of the grace period for that payment. ◦If a monthly payment is made later than the first day of the month to which it applies, but before the end of the grace period for the month, coverage under the group health benefit program may be suspended as of the first day of the month and then retroactively reinstated when the monthly payment is received. ◦If a monthly payment is not made before the end of the grace period for that month, all rights to COBRA coverage under the Plan will be lost.

Paying for COBRA Coverage Are there grace periods for monthly payments? cont’d ◦If mailed, payments are considered to have been made on the date that the payment is postmarked. If hand-delivered, payments are considered to have been made when the payment is received by the COBRA Administrator. ◦Payment will not be considered to have been made by mailing or hand delivering a check if your check is returned due to insufficient funds, an incorrect payee, or otherwise. ◦Payment will not be considered to have been made by mailing or hand delivering a check or money order if your check or money order is not made in the full monthly premium amount until the balance of that monthly premium is received and only if the balance is received within the allotted grace period for that payment. ◦Qualified beneficiaries are permitted to make payments in half month increments in the first and last months of coverage only if they begin coverage on the 16 th of the month and/or terminate coverage on the 15 th of the month.

Special Considerations What are some special considerations in deciding whether to elect COBRA? ◦In considering whether to elect COBRA, you should take into account that a failure to elect COBRA will affect your future rights under federal law in the following important respects:  You can lose the right to avoid having pre-existing condition exclusions applied to you by other group health plans if you have more than a 63-day gap in health coverage  You may lose the guaranteed right to purchase individual health insurance policies that do not impose such preexisting condition exclusions if you do not get COBRA coverage for the maximum time available to you  Your special enrollment rights under federal law

Special Considerations What information will I need from prospective employers to help in my decision of whether to purchase COBRA coverage? ◦Will my new employer offer an employee benefit package? ◦Are both medical and dental coverage included in the employee benefit package? ◦Will my employer impose a waiting period after the start of employment before employee benefits take effect and if so what is the duration of the waiting period? ◦Will my new employer’s health care plan contain pre-existing condition exclusions? ◦Will my new employer’s health care plan meet my needs?

Other Health Care Options If I choose not to elect COBRA, what other options do I have?  Coverage through a new employer  Coverage through a spouse’s employer ◦ Be aware of special enrollment rights and notification requirements ◦ COBRA mailing can be used as proof of loss of coverage ◦ Certificate of coverage will be provided by the carrier once notification of termination has been received and processed  Coverage purchased independently ◦ Importance of plan understanding ◦ Weigh cost vs. coverage  No coverage

Important Reminder Remember to keep the Plan notified of your current address and contact information ◦Receipt of COBRA information packet ◦Accessibility while enrolled ◦Carrier Communications ◦2011 W2

Thank You