COBRA Questions

This year we have started a new procedure requiring employees who want to continue to contribute to their FSA and submit claims to do so through COBRA. The question is whether the termination counts as a qualifying event that would allow the employee to change their contribution. (If they were contributing $200/month could they change it to $1 to insure their ability to submit claims against the money already contributed for the remainder of the calendar year?)

Second COBRA question: We have always allowed employees to switch insurance options (within a carrier or to another carrier) when they elected COBRA. Now, our Benefits dept is saying they can't switch, but can only elect COBRA for the insurance plan they chose at open enrollment. Is there any part of the COBRA regs that require us to allow them to switch? We've had many employees want to switch to Kaiser when they take COBRA because it's cheaper than the others.

We are outsourcing all of our Benefits admin and are going through a period of upheaval!!


  • 4 Comments sorted by Votes Date Added
  • I know that our carrier (Blue Cross)does not consider going to COBRA as a qualifying reason to change PPO options (different deductible, co-pays). I had someone wanting to change to the lower cost option when they elected COBRA and BCBS kicked it back saying their choice had to be in effect the entire calendar year.

    I'm interested in hearing what happens on the FSA situation - we just started a FSA plan this year and I was not aware that employees could choose COBRA for that - I was told it just ended when ee terminated.
  • Section 125 FSAs are subject to COBRA, and you must offer COBRA; terminating employment is not a status change allowed under Section 125 (events which allow change in annual election). That is, people cannot change their election amount because they terminate employment. Under COBRA, qualified beneficiaries are allowed to continue coverages which they had the day before the qualifying event of termination. They may, however, change during open enrollment as any other active employee.
  • irenesmsaclaims is right. Under the COBRA regulation, if they choose to continue their insurance through COBRA with you, they must stick with the insurance they chose at your last open enrollment. If they continue with their insurance with you through the COBRA enrollment, at the next open enrollment you have, they can then elect to change to a less expensive premium plan if they so chose.
  • Thank you - your replies are very helpful. I knew you'd have the answers!
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