In this quarter’s COBRAinReview, we will examine the eleven month Disability Extension, eligible/ineligible plans for COBRA continuation coverage and a recent change to the software’s election form.
COBRA’s Disability Extension
COBRA offers employee and/or covered dependents an eleven month extension to the current COBRA completion date if certain criteria are met. The extension is provided so qualified beneficiaries may remain on COBRA until they become entitled to Medicare. In theory, affected individuals will meet Medicare’s requirements and be entitled within these eleven months. During the extension, Plan Administrators may charge up to a 50% fee on the applicable premium. The following are the eleven month extension criteria:
- The original qualifying event must have been:
a. Termination of Employment; or
b. Reduction in Work Hours.
- Either the employee or covered dependent (spouse or child) must have been considered “disabled” by the Social Security Administration (SSA) on or prior to the 60th day on COBRA.
- The Plan Administrator must be notified of the SSA’s disability determination within 60 days after the latest of:
a. The date of the SSA determination;
b. The date of the COBRA qualifying event;
c. The date the employee’s group coverage was lost as a result of the COBRA qualifying event; or
d. The date the employee and covered spouse are informed through the carrier’s Summary Plan Description of both the responsibility of providing the “disability” determination and the procedures for providing the notice; and
- The SSA “disability” notification must be provided to the Plan Administrator prior to the COBRA completion date.
When the above criteria are met, all individuals enrolled under COBRA shall be eligible for the extension. The DOL and IRS have an interesting interpretation of this aspect of the extension. They have determined that the qualified beneficiary who is deemed disabled does not have to elect to continue under COBRA. So, if you receive a SSA disability determination of the employee or covered dependent that was enrolled on the group plan on the day prior to the qualifying event, it does not matter if they elect to continue under COBRA – all other qualified beneficiaries should be offered the extension. If this is the case, Plan Administrators may only charge the standard 2% (and not 50%) COBRA fee.
We would like to point of the importance of 3d above. If you review the DOL COBRA General Notice, the letter provides detailed instructions as to the notification requirement if a qualified beneficiary is deemed disabled by SSA. If the employee (and covered spouse) never received the General Notice upon enrollment in a group plan, they would have to be offered the eleven month extension even if they notified the Plan Administrator late.
Over the years, we have found the qualified beneficiary’s 60 day notification requirement to be the most often missed element for the disability extension. Some Administrators are adamant about meeting this requirement; others let it slide if all other criteria are met. In theory, an employee may have received his/her General Notice in 1986. Is it reasonable to assume anyone would retain the disability notification requirements after 32 years? Remember COBRA is a minimum requirement. If you wish to offer greater benefits than that required by law, you are welcome to do so. But, you need to make sure the group plan insurer is on board with your policy because they are ultimately responsible for the claims during the disability eleven month extension.
Eligible /Ineligible Plans for COBRA Continuation
With most organizations, it is easy to determine if a group plan is eligible for COBRA continuation. But some group plans might not be as obvious. First, it is important to understand the definition of a group plan. The IRS defines a group plan as “a plan maintained by an employer or employee organization to provide health care to individuals who have an employment-related connection to the employer or employee organization or to their families.” These individuals consist of employees, former employees and other associated or formerly associated with the employer or employee organization in a business relationship (including members of a union who are not current employees). Health care is provided under a plan whether provided directly or through insurance or reimbursement.
Group health plans must provide medical care (within the meaning of IRS Code, Section 213(d)). Medical care is defined as a diagnosis, cure, mitigation, treatment or prevention of disease and any other undertaking affecting any structure or function of the body. Lastly, the group health plan must be maintained by the employer.
Eligible Plans for COBRA Continuation
The following lists are plans you should be offering COBRA continuation.
- Health Insurance Plans, HMOs and Self-funded Health Plans;
- Dental Plans;
- Vision Plans;
- Indemnity type Cancer (or specific disease) Policies – plans that pay a dollar amount per incident and not an amount based upon actual claims;
- Prescription Drug Plans;
- Health Flexible Spending Arrangements (FSAs);
- Health Reimbursement Plans (HRAs);
- Executive Medical Reimbursement Self-funded Plans;
- Drug or Alcohol Treatment Programs;
- Wellness Plans; and
- Employee Assistance Plans.
Ineligible Plans for COBRA Continuation
The following is a review of “group” plans that are not eligible for COBRA continuation. (Remember, COBRA is a minimum requirement placed on employers. If they chose to offer continuation coverage on these plans, they can do so provided they have the approval of the insurer/provider.)
- Health Savings Account (HSAs) and Archer MSAs;
- Long-term Care Plans;
- Accidental Death and Dismemberment Plans (AD&D);
- Group Term Life Plans (with the exception of Minnesota where state law requires it);
- Short – and Long-term Disability Plans (STD & LTD);
- Hospital Indemnity Plans (where payments are not directly associated with the cost of services). For example, the plan pays $200 per day the person is in the hospital;
- Company Fitness Centers and On-site First Aid Facility; and
- Employee Discount Plans.
Software’s Election Notice
Some companies have insurance plans with different tier structures. For example, they may have a medical plan that is a four-tier plan (Single, EE
& Spouse, EE & Child(ren) and Family) and dental plan with a three-tier structure (Single, Two Party and Family). In the past, the system would create one grid of rates and place the rates under a similar table heading.
Recently, we had a qualified beneficiary question a rate under a heading that he was not eligible for but do to the way it was printed, argued for the lower premium. Without going into the details, COBRA Solutions has changed the formatting for showing rates under the Election Form of the Qualifying Event Letter.
The Election Notice will now show the different tier structure headings for each of the plans. If your plans all have the same “standard” tier structure, you will not notice the change. We understand this change may lengthen the letter but we felt it was vital to make this change to eliminate future clarification issues.
Software’s General Notice
Throughout the years, the COBRA General Notice has been addressed to the Employee “and Family” when employees have covered dependents. This has proven to be an effective and efficient form of notification. It has come to our attention that a spouse argued they did not know they were eligible to read the notification because it did not specifically mention them by name.
The administrator requested we provide a way to address the letter so the spouse’s name appears on the notification to eliminate any confusion. COBRA Solutions created another notification variable that will address the letter as “John Doe, Jane Doe and Family.” To have your letter(s) produce a notification in this format, you may Edit a Letter (under the Notifications Menu) and add the variable “<SPOUSE>” (which must be in all caps). If you place this next to the Variable
<WHO>,, the letter will be produced with the spouse’s name (if entered into the system). So, your letter would need to look like this in the address section of the letter:
Dear <WHO> <SPOUSE>,
If the employee does not have a spouse, the letter will ignore the variable. COBRA Solutions does not believe this change is mandatory. There have not been any court cases or federal legislation that would dictate you make this change to your notices but we wanted to offer a solution if you determine you would feel more comfortable sending notices that will specifically address a spouse. We know many administrators do not enter spouse information in the system and if we required everyone to implement this change, these administrators would be required to enter the spouse’s information.