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Guidance on how to take care of unusual COBRA situations

Posted April 26, 2017

By Ed Zalewski, PHR, editor, J. J. Keller & Associates

Employers with 20 or more employees that offer health coverage need to understand the requirements of the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA gives workers and their families the right to continue group health benefits for a limited time after a qualifying event such as voluntary or involuntary termination, a reduction in hours that would result in a loss of coverage, the death of a covered employee, or a divorce from a covered spouse.

In some cases, the employer will be aware of the qualifying event (like a termination) and must notify the plan administrator within 30 days. However, the employer may not know about some personal events, so the employee or qualified beneficiary must notify the plan administrator within 60 days after events such as divorce, legal separation, or a child’s ceasing to be covered as a dependent under plan rules.

Within 14 days after receiving notice that a qualifying event occurred, the plan administrator must provide an election notice to the qualified beneficiaries, either in person, by mail, or electronically. The U.S. Department of Labor offers model notices that can be used for this purpose. Qualified beneficiaries must be given at least 60 days for the election, measured from the later of the coverage loss date or the date the COBRA election notice is provided. If elected (and paid for), the COBRA coverage is retroactive to the date that coverage would have been lost.

Employers can face lawsuits for failing to provide the required notices, and may be liable for the medical claims of qualified beneficiaries who could have received coverage if a notice had been provided. Therefore, understanding the notice requirements is particularly important when unusual situations arise.

‘I changed my mind’

Employees or their dependents might initially decline to elect COBRA, but later change their minds. If the person initially waives COBRA coverage, he or she may revoke the waiver and elect COBRA coverage, as long as the 60-day election period has not ended. In that case, however, the plan only needs to provide continuation coverage beginning on the date the waiver is revoked.

Different choices

COBRA gives each qualified beneficiary a separate right to receive a written election notice. The requirement to notify each qualified beneficiary may, in some cases, be met by mailing one notice to a home address where the qualified beneficiaries reside. The notice would have to clearly identify the qualified beneficiaries covered, and clearly explain the separate and independent right each has to elect COBRA. Each individual could make a different choice, although the employee or the spouse may elect continuation on behalf of all the other qualified beneficiaries.

Change in benefits

It may happen that a COBRA election period overlaps an open enrollment period or change in benefit offerings. Qualified beneficiaries who have the right to elect COBRA must be allowed to make the same choices given to active employees under the plan.

Missed premiums

If an employee or qualified beneficiary fails to make premium payments on time, the plan has the option to cancel coverage, or to cancel coverage until payment is received and then reinstate the coverage retroactively. However, if coverage was terminated because the individual did not make the payment within the grace period, the plan is not required to reinstate coverage.

Gross misconduct

A COBRA election notice does not have to be provided if an employee was terminated for gross misconduct. Unfortunately, this term is not defined by law or regulation, and courts have applied different standards. A finding of gross misconduct will depend on the facts and circumstances.

Generally, termination for reasons such as excessive absences, poor performance, or swearing at other employees is not “gross misconduct.” Employers should be wary of refusing to send a COBRA notice following a termination for misconduct, and may want to check with legal counsel before deciding to deny COBRA rights.

The bottom line is this: Employers that are required to comply with COBRA should understand not only the basic notice obligations, but how to address unusual situations that may arise.

About the author:

Ed Zalewski

Ed Zalewski is a certified Professional in Human Resources and an editor at J. J. Keller & Associates, a nationally recognized compliance resource company that offers products and services to address the range of responsibilities held by human resources and corporate professionals. Zalewski specializes in employment law topics such as the Fair Labor Standards Act, employee benefits, and discrimination and harassment. He is the author of J. J. Keller’s FLSA Essentials guidance manual and BottomLine Benefits & Compensation newsletter. For more information, visit