## (USA) Understanding COBRA

This chapter includes overviews and conceptual information for:

- Consolidated Omnibus Budget Reconciliation Act (COBRA) features.

- What is a qualifying event?

- Who are qualified COBRA beneficiaries?

- How do you comply with COBRA coverage?

- User-defined codes (UDCs) for COBRA.

### COBRA Features

Companies that maintain group health plans are required to offer employees and their dependents continuation of coverage at group rates, which the employee would otherwise have forfeited due to qualifying events such as termination, reduction of work hours, divorce, and so on. This requirement is known as COBRA. The act applies to companies with more than 20 employees.

Companies are also required to provide certification to qualified employees that confirms previous coverage, limits preexisting conditions exclusions, provides special enrollment rights to specified employees and dependents, and prohibits discrimination in plan enrollment and premiums. This requirement is known as Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The Benefits COBRA administration feature enables companies to maintain control of their own programs in compliance with federal and state regulations.

Employees who leave the company might be entitled to COBRA coverage. Their dependents and beneficiaries might also be entitled to this coverage. Plan administrators are required to notify each qualified beneficiary who is entitled to elect continuation coverage. The regulations permit a single election notice that is provided to multiple qualified beneficiaries who are part of a single-family unit if they reside at the same address, based on the current information available to the plan. Specific notices must be provided to qualified beneficiaries in the event that the administrator terminates a period of continuation coverage before the end of its maximum duration. Specific notices must also be provided to qualified beneficiaries in the event that the administrator determines that a qualified beneficiary is no longer eligible to receive continuation coverage, as in the case of a dependent that comes of age. You process claims and benefits for COBRA participants in the same way that you process claims for employees who are enrolled in the same plans.

You can track the dates on which a qualified beneficiary is eligible for COBRA, elections, and payment dates. You use COBRA notification history to track pertinent information for each of the notices that you send. You can also enter additional information for all qualified beneficiaries.

After you enroll qualified beneficiaries, you can run a variety of COBRA reports to review the COBRA coverage that the qualified beneficiary has chosen, as well as all additional information that has been entered regarding the beneficiary.

This guide is not a replacement for the federal and state requirements. You should be familiar with the regulations and mandates provided by COBRA to implement and maintain the COBRA coverage benefits. For current legislative information about COBRA administration, contact the regional or district office of the Pension and Welfare Benefits Administration for the U.S. Department of Labor.

### What Is a Qualifying Event?

Qualifying events are specified events that result in an employee losing group health coverage. The type of qualifying event determines who the qualified beneficiaries are and the length of the coverage period that is offered under COBRA. A plan, at its discretion, might provide longer periods of continuation than required by law.

Examples of qualifying events for an employee are:

- Voluntary or involuntary termination of employment for any reason other than "gross misconduct."

- Reduction in employment hours, such as changing from full-time to part-time status or taking a leave of absence.

Examples of qualifying events for a spouse include:

- Voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct.

- Reduction in employment hours worked by the covered employee.

- Death of the covered employee.

- Divorce or legal separation from the covered employee.

- Eligibility of the covered employee to enroll in Medicare.

Examples of qualifying events for a dependent child include:

- Loss of dependent child status under the employer's plan rules.

- Voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct.

- Reduction in employment hours worked by the covered employee.

- Death of the covered employee.

- Divorce or legal separation of the covered employee.

- Eligibility of the covered employee to enroll in Medicare.

### Who Are Qualified COBRA Beneficiaries?

A qualified beneficiary is any individual covered under the employer's group health plan on the day before a qualifying event occurs. Each qualified beneficiary who elects COBRA coverage receives the same core benefits that they were entitled to prior to the qualifying event. Qualified beneficiaries include:

- Employee

- Employee's spouse

- Employee's dependent children

### How Do You Comply with COBRA Coverage?

Employees and their dependents who are affected by a qualifying event are entitled to COBRA coverage. You must notify employees that they are qualified beneficiaries and are eligible for COBRA coverage. Qualified beneficiaries are responsible for paying the premium for the plan and any administrative, or handling, fees that are incurred. You administer claims and benefits for COBRA participants in the same way that you administer them for the employees who are enrolled in the same plans, including flexible spending accounts.

You can track the date on which a qualified beneficiary is eligible for COBRA, election dates, and payment dates. You can send initial notice letters and record the dates on which you sent them. You can also set up and maintain additional information, or supplemental data, for all qualified beneficiaries. For example, you can record medical history or plan remittance information.

After you enroll qualified beneficiaries, you can print reports to review information about COBRA coverage. You can also print reports that include the additional information that you entered as supplemental data.

This table describes COBRA-related terms that are used throughout the software:

Term | Description
Benefit group | Any group that includes employees who are eligible for the same benefit plans. Many companies establish a COBRA benefit group specifically for qualified beneficiaries who have elected to enroll in COBRA coverage.
Benefit plan | Any plan available with COBRA that is offered by the employer. These plans include, but are not limited to: Medical insurance Dental insurance Flexible spending accounts
Dependent | Any person, usually related to the employee, who is eligible for coverage in a benefit plan. A dependent is also a qualified beneficiary.
Qualified beneficiary | Any person who is entitled to receive benefits from a COBRA plan. A qualified beneficiary who elects the COBRA coverage is often called a COBRA participant. This term can be used interchangeably with qualified beneficiary.
Qualifying event | Any occurrence that causes an employee or qualified beneficiary to lose group insurance coverage and which, under COBRA regulations, qualifies the qualified beneficiary for continuation of coverage. For example, an employee who is terminated for gross misconduct loses group insurance coverage, but, under COBRA regulations, is not entitled to continued coverage. Therefore, termination for gross misconduct is not a qualifying event.

### UDCs for COBRA

This section provides an overview of the UDCs for COBRA.

COBRA Notice Type (UDC 08U/CN)

COBRA notice type codes specify the type of COBRA notice to create.

COBRA notice type codes are hard-coded and should not be changed. Verify that these codes exist:

- COBRAELECT: COBRA Election Notice

  Special Handling: D0800696E

- COBRAUNAVL: COBRA Unavailability Notice

  Special Handling: D0800696U

- COBRATERM: COBRA Termination Notice

  Special Handling: D0800696T

- HIPAA: HIPAA Letter

  Special Handling: D0500029H

Unavailability Reason Code (UDC 08U/UR)

Unavailability reason codes indicate the reason that COBRA coverage is no longer available to the qualified beneficiary.

Unavailability reason codes are not hard-coded; you can add, revise, and remove codes to correspond to the business needs. Examples of unavailability reason codes might include:

- 01: Terminated for cause

- 02: Passed age limit

Termination Reason Code (UDC 08U/TR)

Termination reason codes indicate the reason that COBRA coverage has been terminated.

Termination reason codes are not hard-coded; you can add, revise, and remove codes to correspond to the business needs. Examples of termination reason codes might include:

- 01: Employer ceases health coverage

- 02: Required payment not received