FAQs

Consolidated Omnibus Budget Reconciliation Act (COBRA)

This notice explains your rights to group health continuation coverage under COBRA, should you and/or your dependent lose your group coverage in the future.

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 "COBRA continuation coverage") at group rates in certain instances where coverage under the plan would otherwise end. Individuals entitled to COBRA continuation coverage are referred to as "qualified beneficiaries." COBRA continuation coverage applies to employer-sponsored group or individual medical, dental, vision, prescription drug plans, certain health flexible spending accounts, and other arrangements that provide similar benefits.

This notice is intended to inform you, in a summary fashion, of your rights and obligations under the continuation coverage provision of the law. (Both you and your spouse should take time to read this notice carefully.)

Right to Elect Cobra. If you are an employee covered under the group health plan, you have an independent right to choose COBRA continuation coverage if you lose your group health 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 covered under the group health plan as the spouse of an employee, you have an independent right to choose COBRA continuation coverage if you lose group health coverage due to any of the following four qualifying events:

  1. The death of your spouse;
  2. A termination of your spouse's employment (for reasons other than gross misconduct on your part) or reduction in your spouse's hours of employment;
  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 under the group health plan, he or she has an independent right to choose COBRA continuation coverage if group health coverage is lost due to any of the following five qualifying events:

  1. The death of the parent-employee;
  2. The termination of the parent-employee's employment (for reasons other than gross misconduct on your part) or reduction in the parent-employee's hours of employment;
  3. Parents' divorce or legal separation;
  4. The parent-employee becomes entitled* to Medicare; or
  5. The dependent ceases to be a dependent child, as defined in the group health plan.

A child who is born to or placed for adoption with a covered employee during a period of continuation coverage is deemed a qualified beneficiary for COBRA purposes. The newborn or adopted child must be added to COBRA coverage within the time frame allowed by the plan. The maximum coverage period for the newborn or adopted child's is measured from the original date that COBRA coverage began.

You cannot lose your COBRA rights if you have other health care coverage (including Medicare entitlement) prior to electing COBRA continuation coverage. Similar rights may apply to certain retirees, spouses, and dependent children of a retiree if the employer commences a bankruptcy proceeding and these individuals lose coverage within 12 months before or after the date on which the bankruptcy proceeding begins.

Notice Requirements. Under the law, the covered employee or a family member has the responsibility to inform the Plan Administrator of a divorce, legal separation, or a child losing dependent status under the terms of the group health plan within 60 days after the date of the qualifying event or the date on which the qualified beneficiary would lose coverage because of the qualifying event, whichever is later. As soon as you experience a qualifying event, you must contact the Plan Administrator and request a form titled "Cobra Qualifying Event-Notice to Plan Administrator." It is your responsibility to complete, sign and return the form to the Plan Administrator within the 60-day period in order to be eligible for COBRA continuation coverage.

The employer has the responsibility to notify the Plan Administrator of the employee's death, termination, reduction in hours of employment, or Medicare entitlement*. If there is a loss of coverage in anticipation of a qualifying event, you may still be entitled to continuation coverage. If this applies to you, please notify your employee benefits representative immediately to determine your COBRA rights.

When the Plan Administrator is notified that a qualifying event has occurred, you will be notified in writing at your last known address that you have the right to continue your coverage. Under the law, you have a 60-day election period during which you must inform the Plan Administrator in writing that you want continuation coverage. This election period begins on the later of: (1) the date you lose coverage due to one of the events described above, or (2) the date you are provided your COBRA election notification. Each qualified beneficiary has independent election rights. However, a covered employee or the spouse of the covered employee may elect continuation coverage for all qualifying family members. If you are or become mentally or physically incapacitated during this election period, an appointed guardian or responsible party may elect and/or pay for COBRA continuation coverage on your behalf.

Under COBRA, you must be offered the opportunity to elect the group health plan coverage that is provided to active employees. Ordinarily, this will be the same coverage you had on the day before the qualifying event. You must also be offered the same rights as active employees at open enrollment and HIPAA special enrollment periods. Your continuation coverage is subject to change if coverage under the plan is modified for active employees.

If you choose continuation coverage, your election (or payment) is considered made on the date you send your election form (or payment) to the plan. If you do not choose and pay for continuation coverage, your group health coverage will end in accordance with the terms of the plan and you will cease to be a qualified beneficiary at the end of the election period.

Cost of COBRA Continuation Coverage. Under the law, you must pay the premium for COBRA continuation coverage. The plan has the right to charge up to 102 percent of the applicable premium for this coverage on a monthly basis. Premiums are due on the first of the month for the month of coverage. You have 45 days from the date you elect continuation coverage to pay the initial premium. A 30-day grace period applies to all subsequent premium payments.

Period of COBRA Continuation Coverage. The law requires that you be given the opportunity to maintain continuation coverage for three years, unless you lost group health coverage due to employment termination or a reduction in hours of employment. In that case, the required continuation coverage period is 18 months.

Disability Extension. A continuation coverage period of 18 months may be extended to 29 months if any qualified beneficiary is determined to have been disabled (under Title II or XVI of the Social Security Act) at any time during the first 60 days of COBRA continuation coverage. In the case of a newborn or adopted child, the 60-day period is measured from the date of the child's birth or placement for adoption. To qualify for this extension, you must contact the Plan Administrator and request a form titled "Cobra Qualifying Event-Notice to Plan Administrator." It is your responsibility to complete, sign and return the form to the Plan Administrator and include the Social Security Administration disability determination letter (commonly referred to as a "Notice of Award") within 60 days after the date the determination is issued and before the end of the original 18-month continuation coverage period.

The disabled individual may be any qualified beneficiary (former employee, spouse or dependent). Additionally, the disability extension applies independently to non-disabled family members who are qualified beneficiaries due to the termination or reduction in hours of employment. The Plan Administrator must be notified within 30 days of any final determination that the individual is no longer disabled.

As mentioned above, the plan can require 102 percent of the applicable premium for continuation coverage. However, if coverage is extended due to a disability and the disabled individual is part of the coverage group, the plan may charge up to 150 percent of the applicable premium during the disability extension period. If only non-disabled qualified beneficiaries are in the coverage group, 102 percent of the applicable premium would apply.

Second Qualifying Event Extension. A continuation coverage period of 18 or 29 months may be extended to 36 months for eligible dependent qualified beneficiaries if a second qualifying event occurs (such as employee death, divorce, legal separation, employee Medicare entitlement* or a child losing dependent status) during the 18- or 29- month period. The extension applies only if the Plan Administrator is notified in writing within 60 days of the second qualifying event and within the original 18- or 29- month coverage period. In no event will continuation coverage last beyond three years from the date of the event that originally made a qualified beneficiary eligible to elect coverage. A reduction in hours followed by a termination of employment is not considered a second qualifying event for COBRA purposes.

If the qualifying event occurs within 18 months after the employee became entitled to Medicare, the covered spouse or dependent children are entitled to a COBRA coverage period that ends 36 months after the employee became entitled to Medicare.

Near the end of an 18-, 29- or 36-month continuation coverage period, you will be notified of your right to convert from group coverage to an individual policy (if such conversion option is available under the provisions of the group health plan).

Termination of COBRA Continuation Coverage. The law provides that your continuation coverage may be terminated for any of the following reasons:

  1. The employer no longer provides group health coverage to any of its employees;
  2. The premium for your continuation coverage is not paid on time;
  3. You become covered under another group health plan, after the date of COBRA election that does not contain any applicable exclusion or limitation period with respect to any preexisting condition you may have. (This rule applies only to the qualified beneficiary who becomes covered by another group health plan);
  4. You become entitled* to Medicare, after the date of COBRA election, then coverage will cease for the person who becomes entitled to Medicare;
  5. You extended coverage for up to 29 months due to your disability and there has been a final determination that you are no longer disabled. In such case, coverage for all qualified beneficiaries will end with the first month beginning more than 30 days after the SSA determination or, if later, at the end of 18 months of continuation coverage.;
  6. You request cancellation of COBRA continuation coverage in writing;
  7. The group health plan terminates coverage for cause on the same basis as for an active employee.
  8. Your maximum coverage period expires.
  9. Your employer stops making contributions to this group health plan on behalf of its active employees and provides alternative coverage to those employees under another group health plan.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) restricts the extent to which group health plans may impose pre-existing condition limitations. HIPAA coordinates COBRA's other coverage cut-off rule with these new limits as follows.

If you become covered under another group health plan, and that group health 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 group health plan may terminate your coverage.

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

Additional Information. This notice provides you with a broad overview of a complex federal employer law. This notice does not fully describe your rights under the plan. Please refer to your copy of the Insurance Benefits Certificate, Summary Plan Description or Plan Document for specific details about your plan benefits and COBRA rights.

In order to protect your rights you should keep the Plan Administrator informed of a change of marital status, or a dependent ceases to be a dependent eligible for coverage under the plan, or you, your spouse or dependent child have a change of address, you must notify the Plan Administrator at the following address:

PacFed Benefit Administrators, Inc.
1000 North Central Avenue, Suite 400
Glendale, CA 91202

Special COBRA rights apply to employees who have been terminated or experienced a reduction of hours and who qualify for a "trade readjustment allowance" or " alternative trade adjustment assistance" under a federal law called the Trade Act of 1974. These employees are entitled to a second opportunity to elect COBRA coverage for themselves and certain family members (if they did not already elect COBRA coverage), but only within a limited period of 60 days (or less) and only during the six months immediately after their group health plan coverage ended. If you qualify or may qualify for assistance under the Trade Act of 1974, contact the plan administrator for additional information. You must contact the plan administrator promptly after qualifying for assistance under the Trade Act of 1974 or you will lose your special COBRA rights.

If you have any questions about this notice please contact:
PacFed Member Services
818-243-0222

*Note: An employee is considered entitled to Medicare Part A, Part B or both, if he or she is age 65 or over and receives (or has applied for) Social Security or is entitled to Medicare/Social Security at an earlier age due to a disabling condition.

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