Q&A: When to Offer COBRA

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Question: During open enrollment, one of our employees dropped her husband from our group health plan. Do we have to offer COBRA in this case?

Answer: No. COBRA is only offered to persons who lose their group health coverage due to specific events, such as the employee’s termination of employment or reduction in hours, or the dependent’s involuntary loss of eligibility because of the employee’s death, divorce, or a child reaching the age limit.

In this employee’s case, there is no COBRA qualifying event. The husband’s loss of coverage is simply due to the employee’s voluntary enrollment choice. On the other hand, a special COBRA rule will come into play if the couple later divorces.

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For example, let’s assume that Mary (the employee) makes an open enrollment change to drop her husband John from her plan coverage as of January 1. On April 1, Mary and John’s divorce is finalized and the plan administrator is notified within 60 days. According to COBRA regulations issued by the IRS, the plan administrator should consider that Mary made the open enrollment change “in anticipation of divorce” and offer COBRA to John. That is, the divorce is a qualifying event with respect to John even though he was not covered under the plan when the event occurred. If John elects COBRA and pays the required premium when due, his coverage will be retroactive to April 1 (the date of divorce) and may continue for up to 36 months. Coverage cannot be reinstated for the months before the qualifying event so there is no coverage for January, February and March.

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Sherri Bennett

Written by Sherri Bennett