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COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1986 requires employers with 20 or more employees to offer continuation of health insurance coverage for the individual and his or her dependents. COBRA qualifying circumstances include death, termination of employment, reduction in hours, divorce or legal separation, entitlement to Medicare, loss of dependent child status, Chapter 11 Bankruptcy of retiree’s employer and military leave.

Employee Notification

The Consolidated Omnibus Budget Reconciliation Act of 1986 requires employers with 20 or more employees to offer continuation of health insurance coverage for the individual and his or her dependents. COBRA qualifying circumstances include death, termination of employment, reduction in hours, divorce or legal separation, entitlement to Medicare, loss of dependent child status, Chapter 11 Bankruptcy of retiree’s employer and military leave.

Employee Notification:

  • Employee generally has 60 days to notify employer of a divorce, separation, retirement, or an aged-out dependent.
  • The employer has 14 days to notify employee and qualified beneficiaries of their COBRA rights.
  • Employees have 60 days to elect COBRA benefits.
  • Employee has 45 days from election of COBRA to submit premium payment (must pay to current).  Following premiums must be submitted to employer within 30 days of premium due date.

Detailed information about COBRA is set forth in the following general Notice which should be given preferably via first class mail to all employees who are covered under the company’s group health plan.

GROUP HEALTH CONTINUATION COVERAGE UNDER COBRA

On April 7, 1986, a federal law was enacted (Public Law 99-272, Title X) requiring that most employers sponsoring group health plans offer employees and their families the opportunity for a temporary extension of health coverage (called “continuation coverage”) at group rates in certain instances where coverage under the plan would otherwise end.  This notice is intended to inform you, in a summary fashion, of your rights and obligations under the continuation coverage provisions of the law.  Both you and your spouse, if applicable, should take the time to read this notice carefully.

If you are an employee of the Company covered by its group health insurance plan (“the Company Plan”) you have a right to choose this continuation coverage because of a reduction in your hours of employment or the termination of your employment (for reasons other than gross misconduct on your part).

If you are the spouse of an employee covered by the Company plan, you have the right to choose continuation coverage for yourself if you lose group health coverage under the Company plan for any of the following reasons:

(1)  The death of your spouse;

(2)  A termination of your spouse’s employment (for reasons other than gross misconduct) or reduction in your spouse’s hours of employment with the Company, including military leave;

(3)  Divorce or legal separation from your spouse;

Or

(4)  Your spouse becomes entitled to Medicare.

In the case of a dependent child of an employee covered by the Company plan, he or she has the right to continuation coverage if group health coverage under the Company plan is lost for any of the following five reasons:

(1)  The death of the employee;

(2)  A termination of the employee’s employment (for reasons other than gross misconduct) or reduction in the employee’s hours of employment with the company;

(3)  The employee’s divorce of legal separation;

(4)  The employee becomes entitled to Medicare;

or

(5)  The dependent child ceases to be a “dependent child” (due to age) under the Company plan.

Under the law, the employee or a family member has the responsibility to inform the Company plan Plan Administrator of a divorce, legal separation, or a child losing dependent status under the Company plan within 60 days of the date of the event.  The Company has the responsibility to notify the Plan Administrator of the employee’s death, termination, reduction in hours of employment or Medicare entitlement within 30 days from the “qualifying event”.  Similar rights may apply to certain retirees, spouses, and dependent children if your employer commences a bankruptcy proceeding and these individuals lose coverage.

When the Plan Administrator is notified that one of these events has happened, the Plan Administrator will in turn notify you that you have the right to choose continuation coverage.  Under the law, you have at least 60 days from the date you would lose coverage because of one of the events described above to inform the Plan Administrator that you want continuation coverage.

If you do not choose continuation coverage on a timely basis, your group health insurance coverage will end.

If you choose continuation coverage, the Company is required to give you coverage which, as of the time coverage is provided, is identical to the coverage provided under the plan to similarly situated employees or family members.  The law requires that you be afforded the opportunity to maintain continuation coverage for 36 months unless you lost group health coverage because of a termination of employment or reduction in hours.  In that case, the required continuation coverage is 18 months.  This 18 months may be extended for affected individuals to 36 months from termination of employment if other events (such as a death, divorce, legal separation, or Medicare entitlement) occur during that 18-month period.

In no event will continuation coverage last beyond 36 months from the date of the event that originally made a qualified beneficiary eligible to elect coverage.  The 18 months may be extended to 29 months if a qualified beneficiary is determined by the Social Security Administration to be disabled (for Social Security disability purposes) at any time during the first 60 days of COBRA coverage.  This 11-month extension is available to all individuals who are qualified beneficiaries due to a termination or reduction in hours of employment.  To benefit from this extension, a qualified beneficiary must notify the Plan Administrator of that determination within 60 days and before the end of the original 18-month period.  The affected individual must also notify the Plan Administrator within 30 days of any final determination that the individual is no longer disabled.

A child who is born to or placed for adoption with the covered employee during a period of COBRA coverage will be eligible to become a qualified beneficiary.  In accordance with the terms of the Company plan and the requirements of federal law, these qualified beneficiaries can be added to COBRA coverage upon proper notification to the Plan Administrator of the birth or adoption.

However, the law also provides that continuation coverage may be cut short for any of the following five reasons:

(1)  The Company no longer provides group health coverage to any of its employees;

(2)  The premium for continuation coverage is not paid on time;

(3)  The qualified beneficiary becomes covered under another group health plan that does not contain any exclusion or limitation with respect to any preexisting condition he or she may have;

(4)  The qualified beneficiary becomes entitled to Medicare;

(5)  The qualified beneficiary extends coverage for up to 29 months due to disability and there has been a final determination that the individual is no longer disabled.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) restricts the extent to which group health plans may impose pre-existing condition limitations. These rules are generally effective for plan years beginning after June 30, 1997.  HIPAA coordinates COBRA’s other coverage cut-off rule with these new limits as follows.

If you become covered by another group health plan and that plan contains a pre-existing condition limitation that affects you, your COBRA coverage cannot be terminated.  However, if the other plan’s pre-existing condition rule does not apply to you by reason of HIPAA’s restrictions on pre-existing condition clauses, the Company plan may terminate your COBRA coverage.

You do not have to show that you are insurable to choose continuation coverage.  However, continuation coverage under COBRA is provided subject to you eligibility for coverage; the Company Plan Administrator reserves the right to terminate you COBRA coverage retroactively if you are determined to be ineligible.

Under the law, you may have to pay all or part of the premium for your continuation coverage.  There is a grace period of at least 30 days for payment of the regularly scheduled premium.

COBRA FORM - SAMPLE

You and your spouse and dependent child(ren), if any, are eligible to receive up to 18 months of continuation coverage from the date of termination or reduction of hours of employment.  However, coverage may extend beyond that period or terminate early, as explained in your election notice.

COBRA Coverage Premium

Within 45 days after the date that you elect COBRA Coverage, you must pay an initial premium, which includes:

The period of coverage from the date of your qualifying event to the date of your election.

Any regularly scheduled monthly premium that becomes due between your election and the end of the 45-day period.

Once the Plan Administrator receives this election form, you will be notified of the amount of the initial premium you must pay.  If you fail to pay the initial premium, or any subsequent monthly premium, in a timely fashion, your coverage will terminate.

      Premium payments are generally due within 30 days after the first day of each month of coverage.  Premium amounts change from time to time.  You will be notified of any change in the premium amount.

      You are eligible for (circle one) FAMILY SINGLE.  Unless you expressly elect otherwise, this coverage will be continued for you (and your spouse and your dependent child(ren), if any).  The regular cost of coverage will be as follows:

      Family Coverage    
      $_______ per month  
     
     
      Single Coverage        
      $______ per month

IF PREMIUM PAYMENT IS NOT RECEIVED ON TIME, COVERAGE WILL TERMINATE AND MAY NOT BE REINSTATED.

COBRA Coverage Election Agreement

I have read this form and the notice of my election rights.  I understand my rights to elect continuation coverage and would like to take the action indicated below.  I understand that if I elect continuation coverage and I fail to pay premium payment on time, this coverage will terminate.  I also agree to notify the Plan Administrator if I or any member of my family become(s) covered under another group health plan or entitled to Medicare.

Please check ONE only.

_____ I elect to continue family coverage under the plan.  (Only to be checked by those qualified beneficiaries who had family coverage before the qualifying event.)

List dependents to be covered:

Relationship     Name     Date of Birth

_______________________________________


_______________________________________


_______________________________________


_______________________________________


_____ I elect to continue single coverage under the plan.

      I have read this form and the notice of rights.  I am waiving my right to continuation coverage under the plan.


Signature:_________________________________

Date:  _____________

Name (Please Print):  ________________________

Address:  _________________________________
       
Telephone:  _______________________________

Send Form to:

Inquiries should be directed to:

________________________

For Office Use Only:

Received by Administrator ___________     Date:  _____________

Category:Employee Benefits

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