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Beyond the Basics – COBRA Coverage

Wednesday, November 13, 2019
Paul Shaheen

By: Paul Shaheen, RHU, REBC, Vice President, / Horton Benefit Solutions

We hope you are staying warm with this early-arrived winter! A few weeks ago, I talked about COBRA basics, and how, per the law, former employees (and/or dependents) can retain coverage for periods beyond their date of group benefit eligibility. 

Now let’s dig a little deeper.

As first discussed, COBRA eligibles can keep coverage for either 18 months (due to termination), 29 months (if terminated due to disability), or 36 months for those ceasing to be dependents (such as a child reaching age 26, or a spouse after death or divorce). 

A key point: when you send out a notice of COBRA eligibility, remember that ANYONE covered on a group medical plan is eligible.  For example, former employees could choose NOT to take COBRA, but their kids and spouses certainly CAN. 

Once a COBRA eligible event occurs, employers have 30 days to notify former employees (and covered dependents) of their COBRA rights, and once received, the former employee has 60 days to reply, and from there, another 45 days to make payment (either direct to you, your medical carrier or a third-party administrator). 

Relatively simple, but here is where employers sometimes are hung up: while someone is in their COBRA eligibility period, employers do NOT need to keep them on their plan. In other words, once someone terminates employment, you should terminate their coverage immediately, and then reinstate them if and ONLY IF they elect COBRA. If you keep a COBRA eligible on your plan, and they later decide not to take it, you could be stuck with the premium, and worse, any claims filed will be paid and potentially used against your claims experience come next renewal.

Another thing to remember: COBRA costs the same (total) premium your insurance carrier charges you as the employer, plus, if you so choose, an additional 2% administrative fee.

Before we bring it all together, there is another last item as it relates to COBRA and continuation of coverage, which you should certainly know. There is a related (and oft-forgotten) state of Illinois rule called “Illinois Spousal Continuation.” 

  • If a spouse age 55 or older were to lose coverage due to the death of (or divorce from) an employee, or if the employee chooses to retire, the spouse can keep coverage (at their expense) until he/she turns 65. 

In addition, because Illinois Spousal Continuation is a richer benefit than COBRA, it must be chosen right away in lieu of COBRA if the spouse would like extended coverage. 

Ok, deep breath, did you get all that? If not, that is okay! We have the advisors here to help you navigate through the various benefit complexities you face every day. Call or email your Horton team representative for more information and clarify your concerns. 

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.