Benefits Q&A: Can Employees Elect COBRA When Coverage is Changed?

Benefits Q&A: Can Employees Elect COBRA When Coverage is Changed?


Q: We have a complicated situation involving the health insurance we offer to the employees of two different companies that have the same owners. For the last three years, each company has offered a separate health plan to its employees. The larger company (Company A, 100+ employees) offers a self-funded plan through Blue Cross. The smaller company (Company B, about 35 employees) offers a fully insured, community-rated plan through a different carrier.

For the upcoming plan year, the owners have decided to eliminate the plan offered by Company B and offer coverage through Company A’s plan. Unfortunately, for some employees, this will result in dramatically higher premiums than they are currently paying. Several employees have asked if they can elect COBRA on their current coverage rather than transition to Company A’s plan. Their COBRA rates on the existing plan are more affordable because their premiums are set by the ACA.

Are these employees entitled to COBRA coverage on their current plan even though coverage is available to them under the new plan? Two of the Company B employees are transferring to Company A if that factors in somehow.

A: For employees of Company B to be eligible for COBRA on their current plan, they would have to experience both a loss of coverage and a qualifying event. The increased cost of coverage under Company A’s plan clearly meets the requirement of a “loss of coverage” under COBRA regulations. Yet the murkier questions are 1) whether there has been a “qualifying event” as defined by COBRA, and 2) whether the loss of coverage was caused by the qualifying event.

It’s important to note that we are talking about qualifying events that trigger COBRA rights, not the similar concept of a “change in status” that entitles someone to change their benefits elections.

The only qualifying events that trigger COBRA for employees are termination of employment and a reduction in work hours. (Other qualifying events trigger COBRA for the spouse and/or dependents, but not the employee.)

In this situation, there is clearly no qualifying event under COBRA for most employees of Company B. This is because they still work for the same company and have not experienced a reduction in hours. Therefore, they are not entitled to COBRA.

By Julie Athey, J.D., Director of Compliance, The Miller Group

See Also:
Benefits Q&A: What COBRA Obligations Come with a Company Acquisition?
Helping Employees When Individual Coverage is the Best Option
Benefits Q&A: How Does Medicare Enrollment Impact HSA Contributions?

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