Q&A: Can a New Employee Keep Their Former COBRA Plan?

Question:

We just hired an employee who currently has COBRA coverage through his former employer’s health plan. He is considering keeping that coverage for now rather than enrolling in our plan. The employee has reasons to prefer staying on the COBRA plan but is concerned that the premiums will become too costly over time. He asked whether he could continue to be on COBRA coverage for a few months and then make a decision on whether to drop it and enroll in our plan.

Is this something we are able to allow?

Answer:

In short, yes, the employee is allowed to stay on his previous employer’s COBRA coverage, but doing so limits his options as to when he can come onto your plan. Therefore, he needs to be strategic on when he would switch to your plan so that he is not accidentally left without medical coverage.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees to maintain their health insurance through a previous employer for a certain period after leaving their job.

An employee who is on COBRA through a previous employer’s plan has several opportunities to enroll in his new employer’s plan:

1. At the same time as any other new employee (i.e., after the relevant waiting period);
2. During the new employer’s open enrollment period(s); or
3. When he experiences a qualifying event that entitles him to a “special enrollment period” under HIPAA.

Special enrollment rights are triggered, for example, when an employee marries, obtains a new dependent, or loses COBRA coverage because he has reached the maximum period of coverage, which is usually 18 months.

In other words, if your employee waives coverage on your plan and later decides to end his COBRA coverage before the end of his maximum coverage period, that will not qualify him for special enrollment on your plan. He would either have to wait until your next open enrollment period, he reaches the maximum period of coverage, or the occurrence of a different qualifying event to enroll.