1. COMMON COBRA CONUNDRUMS
Presented by:
Louanne drenckhahn, MBA, CEBS, SPHR
Employee benefits compliance advisor
4/25/2017

2. agenda INTRODUCTION Qualifying events Leaves of Absence
4/25/2017
agenda
INTRODUCTION
Qualifying events
Leaves of Absence
Retiree coverage
divorce
Adult children
Aca interplay

3. What is COBRA? Consolidated Omnibus Budget Reconciliation Act
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What is COBRA?
Consolidated Omnibus Budget Reconciliation Act
Enacted in April 1986, updated many times most recently in May 2004
Allows eligible individuals to continue their employer provided health insurance coverage at their own expense when coverage would otherwise be lost
Generally, COBRA can last for up to 18 or 36 months

4. In order for COBRA to apply:
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COBRA Road Map
In order for COBRA to apply:
Employer must be subject to COBRA
Coverage must be COBRA continuable
Individual
must be a qualified beneficiary
must have a qualifying event
must elect COBRA coverage
must pay the COBRA premium

5. Employers Subject to COBRA
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Employers Subject to COBRA
Federal COBRA
Employers with 20 or more employees who worked 50% of working days during the previous calendar year

6. Health Plans Subject to COBRA
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Health Plans Subject to COBRA
Health Reimbursement Arrangements (HRAs)
Medical plans (fully-insured & self-funded)
Vision plans
Dental plans
Health FSA

7. Plans Not Subject to COBRA
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Plans Not Subject to COBRA
HSAs – but HDHP subject to COBRA
LTD/STD plans
Life insurance plans
Hospital indemnity plans

8. In order for COBRA to apply:
4/25/2017
COBRA Road Map
In order for COBRA to apply:
Employer must be subject to COBRA
Coverage must be COBRA continuable
Individual
must be a qualified beneficiary
must have a qualifying event
must elect COBRA coverage
must pay the COBRA premium

9. agenda INTRODUCTION Qualifying events Leaves of Absence
4/25/2017
agenda
INTRODUCTION
Qualifying events
Leaves of Absence
Retiree coverage
divorce
Adult children
Aca interplay

10. Qualifying Event Basics
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Qualifying Event Basics
A COBRA Qualifying Event (QE) requires:
A COBRA triggering event
and
A loss of coverage because of the triggering event

11. Qualifying Event Basics
4/25/2017
Qualifying Event Basics
You must have both before COBRA kicks in
If you have a triggering event that does not result in a loss of coverage
then no COBRA
If you have a loss of coverage, but no triggering event

12. COBRA Triggering Events
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COBRA Triggering Events
e.g. termination, layoff, resignation, retirement
Termination of employment
e.g. transfer from FT to PT status, leave of absence
Reduction of work hours
Divorce or legal separation
Death of covered employee
As defined by the plan, generally age 26
Dependent child ceasing to be a dependent child
Typically retiree coverage
Covered employee becomes entitled to Medicare
Retiree coverage only
Employer bankruptcy

13. 4/25/2017
Loss of Coverage
Loss in coverage must be a direct result of the triggering event
Loss in coverage does not have to occur immediately after a triggering event
Most plans allow coverage to run to the end of the month following a triggering event
A few plans allow coverage to continue even longer after a triggering event, e.g. during a layoff
Check your plan document

14. Examples of Qualifying Events
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Examples of Qualifying Events
Employee and spouse lose coverage when employee quits employment
Employee, spouse and child lose coverage when employee is fired or laid off
Spouse loses coverage after divorcing employee
Spouse and child lose coverage when employee dies
Child loses coverage when child no longer satisfies age requirements

15. Non-Qualifying Events
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Non-Qualifying Events
Employee voluntarily drops coverage
(No triggering event)
Employee reduces work hours but still meets hours worked requirements under the plan
(No loss of coverage)
Employee stops paying premiums
Employer changes eligibility criteria
(No triggering event for those losing coverage)

16. agenda INTRODUCTION Qualifying events Leaves of Absence
4/25/2017
agenda
INTRODUCTION
Qualifying events
Leaves of Absence
Retiree coverage
divorce
Adult children
Aca interplay

17. Leaves of absence A leave of absence is a COBRA QE when you have: and
4/25/2017
Leaves of absence
A leave of absence is a COBRA QE when you have:
The leave (a reduction in hours to zero)
and
A loss of coverage due to the reduction in hours

18. Leaves of absence: FMLA
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Leaves of absence: FMLA
Employer is required to maintain group health coverage during FMLA leave, i.e., FMLA leave is not a COBRA qualifying event
Only applies where
Employer subject to FMLA
Employee eligible for FMLA leave, and
Reason for leave qualifies as FMLA leave

19. Leaves of absence: FMLA
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Leaves of absence: FMLA
If employee does not return from FMLA leave, then a COBRA QE has occurred
Note: Do not leave employee on the health plan after FMLA ends—probably no longer eligible
After FMLA ends, notify employee that they are being dropped from the plan and offer COBRA
You can offer to pay part or all of their COBRA premium for some period of time if you want to be the nice employer

20. Leaves of absence: FMLA
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Leaves of absence: FMLA
Employee fails to pay premium during FMLA
If FMLA procedural rules are met, coverage can be cancelled for failure to pay premium
Not a COBRA event at time coverage is dropped
But must offer COBRA if employee fails to return to work at end of FMLA leave (yes, there will be in gap in coverage if they elect COBRA)
Employee stops paying premiums
(No triggering event)

21. Leaves of absence: Non-FMLA
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Leaves of absence: Non-FMLA
Does plan document specifically address eligibility during a leave of absence?
If not, employer’s leave of absence of policy should address when eligibility will end during leave
e.g. at start of leave, after 30 or 60 days, after the first or second full month of leave, etc.
Generally an employee should not be on your plan if they have not worked in over 90 days
Coverage must be cancelled and COBRA offered once eligibility ends

22. Leaves of absence: Workers’ Compensation
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Leaves of absence: Workers’ Compensation
If absence is covered by FMLA, follow FMLA rules
FMLA applies to work related injuries
If FMLA does not apply, handle in same manner as you would for any other non-FMLA leave of absence
Work comp law does not require health insurance be continued during absence caused by work related injury (so you should treat just like a non-work comp medical leave)

23. agenda INTRODUCTION Qualifying events Leaves of Absence
4/25/2017
agenda
INTRODUCTION
Qualifying events
Leaves of Absence
Retiree coverage
divorce
Adult children
Aca interplay

24. Retirement with a retiree plan
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Retirement with a retiree plan
May be a COBRA QE, but it depends
If one plan that includes active and retirees, or separate retiree coverage is identical, then likely no COBRA QE
Employee retires but still has access to the same coverage under the plan or identical coverage under retiree plan
(No loss of coverage)
If retiree coverage is different, then likely a COBRA QE
Termination of employment (retirement)
Causes a loss of coverage under the active plan and the retiree plan coverage is not identical

25. Retirement with a retiree plan
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Retirement with a retiree plan
When can COBRA kick in later?
If the retiree plan is identical but doesn’t last 18 months
Date of Retirement
Retiree eligibility ends due to turning 65
18 months
COBRA the balance of 18 months

26. Retirement with a retiree plan
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Retirement with a retiree plan
When can COBRA kick in later?
Other COBRA QE events can occur, e.g., divorce or dependent child reaching limiting age
If the retiree coverage ends at Medicare, covered dependents get offer for 36 months of COBRA
Date of Retirement
Retiree eligibility ends due to turning 65
36 months
36 months of COBRA for covered dependents

27. agenda INTRODUCTION Qualifying events Leaves of Absence
4/25/2017
agenda
INTRODUCTION
Qualifying events
Leaves of Absence
Retiree coverage
divorce
Adult children
Aca interplay

28. Causes a loss of coverage under the plan for the spouse
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divorce
Is a COBRA QE because:
Divorce
Causes a loss of coverage under the plan for the spouse

29. divorce: employer not notified timely
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divorce: employer not notified timely
Date of Divorce
Employer learns of divorce
36 months
End of COBRA period

30. divorce: Coverage Lost in Anticipation of QE
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divorce: Coverage Lost in Anticipation of QE
Employee voluntarily drops coverage
(No triggering event)
If an employee removes spouse from the plan before divorce, then spouse is not entitled to COBRA at that time but is entitled to COBRA once divorce is final
Removing spouse prior to divorce may raise legal issues for employee and will generally not allow employee to change pretax premium deductions outside of open enrollment
Spouse must notify you of the divorce within 60 days so you are aware to offer COBRA

31. agenda INTRODUCTION Qualifying events Leaves of Absence
4/25/2017
agenda
INTRODUCTION
Qualifying events
Leaves of Absence
Retiree coverage
divorce
Adult children
Aca interplay

32. Dependent child ceasing to be a dependent
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Dependent child ceasing to be a dependent
Is a COBRA QE because :
Dependent child ceasing to be a dependent under the plan
Causes a loss of coverage for the dependent

33. Dependent child: dropped from plan prior to limiting age
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Dependent child: dropped from plan prior to limiting age
Employee voluntarily drops coverage
(No triggering event)
If an employee removes the “child” from the plan before the “child” reaches the limiting age (typically 26), then the child is not entitled to COBRA

34. agenda INTRODUCTION Qualifying events Leaves of Absence
4/25/2017
agenda
INTRODUCTION
Qualifying events
Leaves of Absence
Retiree coverage
divorce
Adult children
Aca interplay

35. Impact of ACA aCA Interplay
4/25/2017
aCA Interplay
Impact of ACA
ACA does not address what happens to health coverage during leave of absence
But for Applicable Large Employers, risk of “play or pay” penalty may influence interpretation of health plan eligibility, which in turn will affect what happens to coverage during leave.
While “play or pay” penalties only apply to health coverage, often makes sense to apply same eligibility interpretation to other benefit plans (where permitted by Plan Documents).

36. Aca interplay Back to COBRA Qualifying Event (QE) basics: and
4/25/2017
Aca interplay
Back to COBRA Qualifying Event (QE) basics:
A COBRA triggering event
and
A loss of coverage because of the triggering event

37. 4/25/2017
ACA interplay
Eligibility Criteria
Classes
Hours
Methodology

38. Common methodology choices
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ACA interplay
Common methodology choices
ACA-FT Status
Easy to administer
Accept strange outcomes caused by look-back measurement
Scheduled Hours
More intuitive
May result in penalties but risk is often acceptable
Additional recordkeeping
Hybrid: ACA-FT Status or Scheduled Hours
Extends coverage to those employees who can trigger a penalty and those who can’t but nevertheless want to offer coverage

39. ACA interplay ACA / Leave of absence example
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ACA interplay
ACA / Leave of absence example
Employer uses look-back measurement method to determine ACA-FT status.
SMP = 11/1/2016 – 10/31/2017
SAP = 11/1/2017 – 12/31/2017
SSP = 1/1/2018 – 12/31/2018
Health plan eligibility = 30 hours per week. Plan document contains no specific language addressing coverage during period of nonFMLA leave.
Nicholas
Nicholas is a full-time* employee who averaged 39.5 hours per week during 11/1/16 – 10/31/17 SMP; Nicholas is ACA-FT for the 1/1/ /31/18 SSP
April 3rd, 2018 Nicholas goes out on FMLA leave due to his own serious health condition, which leave expires on June 25th, 2018.
Nicholas is unable to return to work so employer grants Nicholas an 8 week extension of his medical leave until August 18th, 2018.
What happens to Nicholas’ health coverage during the period of extended leave?
Preliminary question: What is Nicholas’ ACA-FT status during the period of extended leave?
ACA-FT – his employment has not been terminated so his ACA-FT status continues at least through the end of the current SSP.

40. 4/25/2017
ACA interplay
If the employer uses this eligibility methodology, then….
ACA-FT Status
Nicholas is ACA-FT for the duration of the extended leave so Nicholas remains eligible for health coverage during that leave.
Coverage is not COBRAed.
Scheduled Hours
Assuming employer treats employees on nonFMLA leave as not scheduled to work 30 hours per week, Nicholas is not scheduled to work 30 hours per week during the period of extended leave so he is not eligible for health coverage during that leave.
Coverage is COBRAed.
Hybrid

41. Qualifying Event Basics
4/25/2017
Qualifying Event Basics
A COBRA Qualifying Event (QE) requires:
A COBRA triggering event
and
A loss of coverage because of the triggering event

42. Questions? Thank you LouAnne Drenckhahn, CEBS, SHRM-SCP
4/25/2017
Thank you
Questions?
LouAnne Drenckhahn, CEBS, SHRM-SCP
Employee Benefits Compliance Advisor
Associated Benefits and Risk Consulting