Cobra

caroldv

We have two situations regarding Cobra.
1. Our employees contribute toward their health insurance coverage pre-tax. Employee wants to drop family coverage and take single coverage in anticipation of divorce which can be 6-7 months from now. Insurance carrier says he may drop coverage for family at the end of this month. My question is does that mean the spouse becomes eligible for cobra and should I send her a cobra continuation form.

2. Another employee got a divorce on 7/24 but never told us. His wife called us today to tell us and ask for a cobra continuation form. According to regulations, he is supposed to give us a copy of the divorce decree within 60 days, but since I know about it already, shall I ask him for it. In the meantime, is she still covered?

These are firsts for us.

Pearce

In case # 1 my first question would be does your insurance carrier administer your 125 plan? I would be wary of the answer you got and whether or not it actually addresses your 125 plan. Most health plans do not limit when a person can drop coverage; however, the rules of the "umbrella" 125 plan must be adhered to when the employee pays for the coverage through the 125 plan on a pre-tax basis. 125 regulations do not consider a pending legal separation or divorce to be a qualifying event. This is also not a COBRA qualifying event. However, if your 125 plan and your insurance carrier allow the participant to drop the spouse's coverage in anticipation of a divorce, the spouse will be eligible for COBRA coverage from the date of the divorce or legal separation.

In case #2 either participant can give you notice of the divorce. The spouse's coverage ends when she loses eligibility as defined in your plan document (usually date of divorce). Why didn't you ask the spouse for the copy of the divorce decree? She is the one asserting her rights. You need to offer COBRA.

skyrocket

On occasion, an employee may request cancellation of coverage for one or more dependents in anticipation of a COBRA event – such as a divorce. COBRA Final Regulations (1999) state that if coverage is cancelled or reduced in such circumstances, the cancellation or reduction is disregarded for COBRA purposes. If an employer receives information that indicates a Qualifying Event occurred, COBRA procedures must be implemented. A COBRA Notice must be sent and the standard election period must be allowed.

In this above case, the date of the loss of coverage is the date of removal from the plan. COBRA would begin on the date of the Qualifying Event and only premiums beginning from the date of the qualifying event can be required. There is no requirement to reinstate coverage retroactively to the date of the coverage termination.

LindaS

Regarding your first case - although your insurance carrier may allow him to drop coverage for his dependent(s) you should probably advise him against it. While voluntary termination of coverage for a dependent is not a COBRA qualifying event, as soon as the spouse finds out they are no longer covered they will probably petition the court to order continued insurance coverage until the divorce is final. I have had this happen on several occasions and some EEs have decided to go ahead and terminate the coverage only to come back to me several weeks later and ask me to reinstate their spouse due to a court order. Lots of paperwork and headaches!

As for your second case, speak to the EE to get the necessary documentation verifying the divorce and send the COBRA paperwork. Their eligibility depends on what your plan language states, although most state coverage ends as of the divorce date.