Employers with twenty or more employees providing health insurance benefits must offer a temporary extension of the Company's group insurance coverage when an Employee (or covered Dependent) experiences a Qualifying Event. Since COBRA is a temporary extension, benefits remain identical to that of a similarly-situated active Employee. The Participant is responsible for paying the group's premium (plus a small administration fee) and the Administrator is responsible for reimbursing the Insurer. COBRA continuation coverage offers individuals increased time to obtain new coverage and should not be viewed as a permanent plan.


Virtually all Group Health Plans are subject to COBRA with the exception of “small employer plans,” church group plans and federal government plans. A “small employer” is defined as an entity where fewer than twenty employees are employed on the typical business day during the previous calendar year. When calculating the total number of employees, part-time employees should be calculated as a percentage of a full-time employee and all employees must be included (even if they are not on the Group Health Plan).


Covered Employees and/or Dependents experiencing one of the qualifying events explained above (and has a loss of coverage) are eligible to continue coverage under the COBRA. The Plan Administrator should answer the following questions to determine COBRA eligibility:
l) Was one of the listed “qualifying events” experienced? If not, COBRA should not be offered.
2) Will there be a loss of group coverage (defined as “the person ceases to be covered under the same terms and conditions as in effect immediately before the qualifying event”) within the maximum time frames (18, 29 or 36 months)? If not, COBRA should not be offered.
3) Is the person a qualified beneficiary? If not, COBRA should not be offered.

Qualified Beneficiaries have an independent right to elect continuation coverage. For example. a person having family coverage for both medical and dental insurance may elect to continue just medical or dental and can enroll the entire family or just one Qualified Beneficiary. Qualified Beneficiaries may only continue with plans in which they were enrolled on the day prior to the Qualifying Event (unless they move from an Insurer's "service area" and another plan is available or the Qualifying Event occurs during Open Enrollment and similarly situated active employees have the ability to change plans). Effective January l, 1997, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) expanded eligibility under COBRA to include a child born to (or placed for adoption with) the employee and will be granted all rights of a Qualified Beneficiary.

In the past, a person who experienced a Qualifying Event and had coverage from another source (i.e. Medicare or other group coverage), the employer did not have to offer COBRA continuation. A Supreme Court ruling has changed the law so that COBRA must be offered to any Qualifiers, regardless of other coverage enforce at the time of the Qualifying Event.
If a Qualifier is initially denied insurance on a group plan, has the denial reversed and during that time frame experiences a Qualifying Event, COBRA continuation coverage should be offered.


The following are notifications that are required by the COBRA legislation to be distributed by first class mail through the US Postal Service to both Employees and covered Dependents, where applicable.

Initial COBRA Notification

All Employees and covered Dependents shall be sent an COBRA notification letter stating their rights under the law. As new Employees are hired and enroll in one of the group plans, both the Employee nad covered Dependent(s) shall be sent an COBRA notification letter explaining their rights. These notifications should be sent to the last known address of the Employee (and Dependent if different). The letter is to be sent within ninety (but thirty-one is recommded) days from the date coverage is to begin. The letter shall be updated to re?ect any changes in the law or court decisions pertaining to the law. The Initial COBRA Notification shall also be mailed to Dependents added to the Employee's plan during Open Enrollment or when a "Change in Life Status" is experienced.

The importance of the Initial COBRA Notification cannot be overemphasized. The Initial COBRA Notification explains the rights of Employees and Dependents under COBRA and the procedures for notifying the Administrator when a Qualifying Event (or disability) occurs. If this notice is not sent, the Employer may be held liable for claims of Qualifiers.

Qualifying Event Notification

There are seven Qualifying Events that require the Administrator to send a Qualifying Event Notification. Four of the events require the Administrator to automatically send a letter upon realization of the event; the other qualifying events require the employee/dependent to notify the Administrator.

Termination of Employment, Reduction in Work Hours, Employees Death or Company Bankruptcy - When one of these events occur, the Employee and any covered Dependents shall be sent a COBRA Qualifying Event Letter which explains their rights under the law. The letter should be sent to the last known address within fourteen (14) days from the Qualifying Event date or date coverage is to be terminated. This letter should be updated to re?ect any changes in the law or court decisions pertaining to the law.

In the situation of an Employee's Divorce or Legal Separation, Medicare Entitlement or Loss of “Dependent” Status; it is the responsibility of the Employee/Dependent to notify the Administrator of the Qualifying Event within sixty (60) days from the date of the Qualifying Event. If the Administrator is informed (or is not informed but is aware of the situation) by the Dependent, the Administrator shall send a COBRA Qualifying Event Letter to the affected Dependent(s) within fourteen (14) days from the date they were informed.

The Qualified Beneficiary will be given sixty (60) days from the later of the Qualifying Event date or the date coverage is lost to inform the Administrator of their decision to continue one or more of the Company's group plans. Upon notification, the Administrator will have the Qualified Beneficiary complete the necessary COBRA enrollment forms and submit them immediately to the appropriate Insurer.

Conversion Privilege Notification - The third notification required by law is the conversion to an individual plan notification. If available to active employees, COBRA Participants shall be offered the right to continue under a conversion (individual) plan per the guidelines set forth by the associated Insurer. The conversion notification shall be sent approximately (but not earlier than) one-hundred eighty (180) days prior to the end of the Participant's COBRA term (either eighteen, twenty-nine or thirty-six months). Participants shall be directed to contact the appropriate Insurer for further information on conversion coverage.

Certificate of Coverage - With the passage of the Health Insurance Portability and Accountability Act of 1996, the Administrator will provide a Certificate of Coverage to individuals (both as a Qualifier and Participant) that experience a loss of coverage from any or all of the Company's group plans. The Certificate of Coverage will detail the individual's coverage start and completion dates.

Unavailability of COBRA Notification - In the event, the Plan Administrator is informed of a qualifying event but not in a timely fashion or is deemed ineligible for continuation coverage, the person shall be sent the Unavailability of COBRA notice. The May 2003 proposed regulations mandates the creation of this notice so the requesting person does not assume he/she has coverage when in actuality does not. This notice should be mailed within fourteen days of receipt of the person's request for COBRA coverage to the last known address.

Early Termination from COBRA Notification - The May 2003 proposed regulations require Plan Administrators to notify COBRA Participants when their COBRA coverage is being terminated prior to the end of the COBRA term. In the event of termination for nonpayment of premiums, voluntary terminations or other reasons whereby the Plan Administrator is removing a person early, they shall be sent a termination of COBRA letter detailing when and why coverage is being terminated prior to the end of the term.

Qualifier's Notification of COBRA Acceptance

As stated earlier, Qualified Beneficiaries have sixty (60) days from the later of the date of the qualifying event letter or the date benefits are terminated to infonn the Plan Administrator of their desire to continue coverage. (The sixty day time frame start date has really never been defined. Does it start from the date the notice was sent or the date received by the Qualified Beneficiary? For this reason, it is recommended the Plan Administrator provide an additional three days for mail duration.) Once notified, the Plan Administrator shall see that the Qualified Benficiaries receive the necessary COBRA applications required by each Insurer. The completed applications should be forwarded to the appropriate Insurer and should be monitored to verify that the Participant shows on the billing statements. If not, the Administrator should contact the Insurer immediately and re-send the COBRA application.

If the person requesting continuation coverage is deemed “ineligible” for COBRA, the Unavailability of COBRA notice shall be sent within fourteen (14) days from the date the person expresses their desire to continue.


Monthly Premiums - COBRA Participants shall be charge the group rate (the amount charged by the Insurer for a similarly situated active Employee) plus an administration charge (between 0% and 2% of premiums). COBRA Premiums shall not be changed at times other than the annual insurance renewal, a change in Dependents or if a Participant is determined by Social Security Administration to be "Disabled." If a Participant is deemed disabled, the Company may charge an increased administration fee (between 0% and 50% of premiums). Upon receiving renewal rates, the Administrator shall notify the COBRA Participants of the new premiums. If the individual deemed disabled elects not to continue during the eleven month extension, the remaining family unit should be charged the standard administration fee (and not the 50% for disabled Participants).

Premium Due Date - COBRA Participants must make timely premium payments to continue under the Company's group plan(s). There are two (2) different grace periods that shall be offered to COBRA Participants prior to termination from any plan.

Initial Grace Period - Upon notifying the Administrator of their desire to continue, the COBRA Participant will have a forty-five (45) day grace period (commencing on the later of the date the Administrator was notified of the continuation or the date premiums are due to the Insurer) to make their Q premium payment.

Subsequent Grace Period - For all remaining COBRA premium payments, the Participant shall be provided a thirty (30) day grace period.

In the event a Participant's premium is short by an "insignificant amount," a notice will be sent requiring the additional premium or the Plan Administrator may deem the payment as paid-in-full.

The Company will use the postmark date as the determination if a payment is made in a timely fashion.


Since COBRA is a continuation of benefits, coverage/benefits remain the same as prior to the Qualifying Event. If the Company elects to change plans and/or benefits, COBRA Participants would be eligible to enroll in the changed plan, therefore receiving identical benefits as a similarly situated active Employee. If a plan has deductibles and coinsurance maximums, a new determination (i.e. amounts satisfying deductible and coinsurance maximums) will be made based upon expenses incurred prior to the Qualifying Event of only family members continuing under the plan.

COBRA Participants that move from the plan's service area may lose coverage under the group plan (as would a similarly situated active employee). If the organization offers a plan that would provide coverage in the new area, the COBRA Participant should be offered the right to enroll in the new plan.

The law states that a COBRA Participant may be terminated from a plan upon receiving other coverage. It should be understood that if an individual was enrolled on a plan (i.e. Medicare) prior to their COBRA election, they shall still have the right to continue coverage under COBRA.


COBRA Participants are offered the same rights as similarly situated active Employees during Open Enrollment. They may change plans and add/delete eligible Dependents. Although part of the family unit, Dependents added during Open Enrollment will not have the same COBRA rights as the initial Qualified Beneficiaries (unless the Dependent is a child bom or adopted).


Qualified Beneficiaries that experienced either a Termination of Employment or Reduction in Work Hours and who are disabled prior to the first sixty days under COBRA shall be offered an eleven (l1) month extension (or 29 total months). Participants shall be required to provide Social Security's Determination of Disability within 60 days from the date of notification and prior to the end of the 18 month COBRA term. Both the disabled COBRA Participant and his/her Dependents on the plan will be eligible for the eleven (11) month extension. As stated earlier, disabled Participants may be charged up to a 50% administration fee.


Qualified Beneficiaries who have experienced either Termination of Employment or a Reduction in Work Hours shall be offer a total of thirty-six (36) months COBRA continuation if they experience another (or Multiple) Qualifying Event. The thirty-six months will commence from the Employee's original Qualifying Event date. It is the responsibility of the Dependent to notify the Administrator of the Qualifying Event within sixty (60) days of the event. (If a termination of employment follows a Reduction in Work Hours, the maximum time frame offered for COBRA continuation coverage shall be eighteen months).


The Administrator shall terminate COBRA Continuation Coverage upon one or more of the following events:
Insurance Plan Termination - If the Company terminates a group insurance plan for active employees, COBRA Participants shall be notified and terminated from that plan only. If the Company offers a new similar type of Insurance Plan, the Administrator shall offer COBRA Participants the right to enroll in the new plan.

Nonpayment of COBRA Premiums - COBRA Participants will be terminated for nonpayment of premiums if premiums are not postmarked within the applicable grace period.

Coverage Under Another Group Plan - For COBRA Participants that obtain similar coverage under another group plan, the Administrator will notify the Participant of their termination from the Company's Insurance Plan. Prior to termination, the Administrator will review with the Participant, the new group plan's pre-existing condition limitations. If the Participant's new group plan does not cover a pre-existing condition, the Participant may continue under the Company's group plan until the end of the COBRA term.

Medicare Entitlement - Once a Participant becomes entitled to Medicare (Part A and/or B), the Administrator may terminate COBRA Continuation Coverage. Prior to termination, the Administrator shall contact the Participant, establish a date of termination so that there will be no lapse in coverage. Dependents enrolled on the Medicare Entitled person's plan may continue to the end of their COBRA term.

Insurance Company's Service Area - If a Participant is enrolled in an insurance plan that requires members to reside in a specific geographical area and they move from that area, the Administrator shall notify the Participant and terminate coverage. If another similar plan is available in that area, the Administrator shall offer the plan to the Participant. Coverage may be terminated "for cause" for fraudulent claims or other activities in which a similarly situated active employee would be terminated.

If a disabled COBRA Participant is deemed to no longer be disabled during the eleven month extension, the entire family unit may be terminated.

End of COBRA Term - Once the Participant has reached the end of their COBRA time frame (either 18, 29 or 36 months), the Administrator shall send a termination notice. The Participant shall be offered the right to convert to an individual plan (where available) that has no pre-existing condition limitations. In addition, the Company will provide a "Certificate of Coverage" detailing their completion of COBRA.

COBRA Participants have the right to a hearing if they disagree with any termination. At the Participant's request, the Administrator shall set up a hearing and have the appropriate Company managers attend to review the termination and decide on its validity.


The Administrator will document every Qualifying Event, Qualified Beneficiaries electing COBRA, selected plans and premium payments. Reports will be completed on a monthly basis, fled and maintained for a minimum of seven (7) years. Files shall be maintained for all Qualified Beneficiaries and will include copies of all COBRA-related noti?cations, applications and election notices.