When an individual experiences a qualifying event, there are rules in place to determine if he or she is eligible for COBRA, how long the COBRA coverage is active, and when it may be terminated early.
Qualified beneficiaries have the same rights as the participant under the plan.
In order for an individual to be eligible for COBRA benefits, the individual must meet the following eligibility criteria:
- Individuals covered under a COBRA-eligible insurance plan or spending account experience a qualifying event
- Insurance coverage or spending account must be active on the day before the qualifying event occurred that caused him/her to lose coverage
- The individual is eligible to continue his/her group insurance coverage after the qualifying event
COBRA qualifying events – length of eligibility
COBRA sets the rules for how and when group plans must offer continuation coverage, how qualified beneficiaries may elect continuation coverage, and what circumstances justify terminating continuation coverage. Typically, COBRA allows employees and dependents to maintain benefits for 18, 29 or 36 months.
Qualified beneficiaries on an FSA plan can only remain on that plan until the end of the year in which the qualifying event occurred.
Events eligible for 18 months of coverage include:
- Voluntary termination
- Involuntary termination (excluding gross misconduct)
- Reduction of work hours (which causes loss of coverage)
Events eligible for 36 months of coverage include:
- Legal separation
- Child no longer qualifies as a tax dependent
- Death of employee
- An employee becomes entitled to Medicare
- Termination of domestic partnership (state benefits - not federal)
If an employee’s termination is due to gross misconduct (e.g.-violated a federal, state, or local law; charged in criminal court), the employer may not choose to offer COBRA coverage.
Early termination of COBRA
A plan can terminate COBRA coverage early if:
- The required premium for coverage is not paid on time
- There is entitlement to Medicare
- The employee is covered by another group health plan
- The employer terminates the group plan
- For cause (i.e. such as for filing a false benefit)