QUESTION: Our company will soon begin offering coverage under our group health plan to employees’ domestic partners. What rights do domestic partners have under COBRA? May terminating employees elect to continue coverage for their domestic partners?
ANSWER: A terminating employee who elects to continue group health plan coverage under COBRA may also elect coverage for a domestic partner who was covered under the plan immediately before the employee’s termination. The domestic partner’s COBRA coverage will be contingent on the employee’s, meaning that the domestic partner will be entitled to coverage until the employee’s COBRA coverage ends (e.g., for failure to pay required premiums or at the end of the maximum coverage period). This is based on the general principle that COBRA coverage must ordinarily be the same coverage that the qualified beneficiary (in this case, the terminating employee) had on the day before a qualifying event. In addition, under general principles, a qualified beneficiary receiving COBRA coverage under a plan that provides domestic partner benefits would have the right to add an otherwise eligible domestic partner to his or her COBRA coverage at open enrollment if active employees are permitted to do the same.
That being said, domestic partners—unlike spouses—do not qualify as qualified beneficiaries under COBRA and, therefore, do not have independent COBRA rights. But if you wish to provide continuation coverage rights like those provided to spouses, you may do so through plan design. Many employers choose to extend “COBRA-like” rights to domestic partners, including the right to make continuation coverage elections independent of the employee (e.g., upon the employee’s termination of employment or upon termination of the domestic partnership). In general, sponsors of self-insured plans may have more flexibility in this area than sponsors of insured plans, who must obtain agreement from their insurers before they can provide fully equivalent continuation coverage rights. As you implement domestic partner coverage, you will want to consult with your insurer or stop-loss carrier, as applicable, and confirm that your plan document and summary plan description explicitly address COBRA and other continuation coverage rights and any notice requirements that will be imposed (such as the requirement to notify the plan within a specified period that a domestic partnership has terminated).
QUESTION: We understand that our group health plan can terminate COBRA coverage early if a qualified beneficiary becomes entitled to Medicare after electing COBRA. What does it mean to be “entitled” to Medicare?
ANSWER: When qualified beneficiaries (including covered employees) first become entitled to Medicare after electing COBRA coverage, their COBRA coverage can be terminated early—before the end of the maximum coverage period. For this purpose, the Medicare terms “eligibility” and “entitlement” are not synonymous, and it is important to understand the difference. “Entitlement” means that an individual who is eligible for Medicare has actually enrolled in Medicare and may currently receive benefits. An individual who must take additional steps to enroll in Medicare before receiving benefits is not yet “entitled” to Medicare for purposes of the COBRA rules.
Individuals who become eligible for Medicare Part A (hospital insurance) based on age, disability, or end-stage renal disease (ESRD) must apply to become entitled to Part A coverage in many cases, but entitlement is automatic for individuals who have already applied for and are receiving Social Security or Railroad Retirement Act benefits. Individuals become entitled to Medicare Part B (physicians’ services and other health expenses) either automatically when they become entitled to Part A, or later during specified enrollment periods.
Although group health plans are allowed to terminate a qualified beneficiary’s COBRA coverage early upon Medicare entitlement, it is important to remember that the COBRA rights of other qualified beneficiaries in the family unit who are not entitled to Medicare are not affected. For example, the plan could not terminate the COBRA coverage of the spouse and dependent children of a Medicare-entitled former employee.
QUESTION: Although Medicare entitlement is listed as a COBRA triggering event, our company’s COBRA TPA does not offer COBRA to covered employees when they become entitled to Medicare. Is Medicare entitlement a COBRA qualifying event for active employees who become entitled to Medicare but do not lose coverage under our group health plan?
ANSWER: Medicare entitlement is not a COBRA qualifying event for active employees who become entitled to Medicare but do not lose coverage under a group health plan. If a COBRA triggering event (such as Medicare entitlement) does not cause a loss of plan coverage, there is no qualifying event, and COBRA need not be offered. Medicare entitlement rarely causes a loss of plan coverage for active employees and, therefore, will rarely be a qualifying event. This is because the Medicare Secondary Payer (MSP) rules generally prohibit group health plans from making Medicare entitlement an event that causes a loss of coverage for active employees.
The MSP statute generally prohibits a group health plan from “taking into account” the age-based or disability-based Medicare entitlement of an individual who is covered under the plan by virtue of the individual’s current employment status. In addition, the plan generally must provide a current employee who is age 65 or older with the same benefits, under the same conditions, as those provided to employees who are under age 65. Among the employer or insurer actions that constitute an impermissible “taking into account” are (1) terminating coverage because the individual has become entitled to age-based Medicare; or (2) in the case of a large group health plan, denying or terminating coverage because the individual is entitled to disability-based Medicare without also denying or terminating coverage for similarly situated individuals who are not entitled to disability-based Medicare. (Special rules apply for ESRD-based Medicare.) Consequently, Medicare entitlement will rarely be a COBRA qualifying event because it will rarely cause a loss of plan coverage for active employees.
Be aware, however, that it is permissible under the MSP rules for Medicare entitlement to cause a loss of coverage for covered retired employees. In such a case, Medicare entitlement would constitute a qualifying event for the affected spouse and dependent children (not for the covered retiree), permitting them to elect up to 36 months of COBRA under the plan.
QUESTION: As required, our company’s group health plan has extended COBRA election and payment deadlines due to the COVID-19 emergency. How do we handle these deadlines once the outbreak period ends?
ANSWER: As you note, certain COBRA deadlines have been extended—but for no longer than one year—by disregarding (tolling) the COVID-19 “outbreak period,” which began March 1, 2020, and is set to end on July 10, 2023. Agency guidance issued in March 2023 provided examples illustrating the effect of the outbreak period’s end on COBRA election and premium payment deadlines:
Electing COBRA. If a participant experiences a qualifying event and is provided a COBRA election notice on or before July 10, 2023, the individual’s 60-day period to elect COBRA begins to run on July 10, 2023 (making the deadline September 8, 2023). If the qualifying event occurs after July 10, 2023, there is no extension, and the 60-day period is measured from the date the COBRA election notice is provided. Although not expressly addressed, it appears that if a qualifying event occurs on or before July 10, 2023, and the COBRA election notice is provided after that date, the COBRA election deadline would be measured from the provision of the notice.
Paying COBRA Premiums. The guidance provides an example of a COBRA election made on October 15, 2022, retroactive to October 1, 2022. The initial COBRA payment, covering premiums from October 2022 through July 2023 must be made no later than 45 days after July 10, 2023 (i.e., August 24, 2023), with subsequent payments due according to the regular COBRA timeline (the first day of each month of coverage, with a 30-day grace period).
In addition to COBRA deadlines, the end of the outbreak period also affects certain other plan-related deadlines, including those for claims and appeals and HIPAA special enrollments. The agencies have noted that nothing in the Code or ERISA prevents group health plans from continuing to extend deadlines and have encouraged plans to do so—at least for a while—as the outbreak period comes to an end. Keep in mind, however, that any extension beyond what is required should be cleared with plan insurers and stop-loss insurers, as applicable.
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