Which Health Benefits Does COBRA Cover?
The COVID-19 pandemic put a new spotlight on insurance: who is entitled to it and who isn't when an employee departs. The answer lies in the Consolidated Omnibus Budget Reconciliation Act, which generally requires employers with a group health plan and at least 20 employees to temporarily offer continuation of group health coverage that would otherwise have been lost due to a qualifying event.
Qualifying events include job termination for reasons other than gross misconduct, reduction in work hours, divorce or death of the covered employee. Individuals entitled to COBRA, called "qualified beneficiaries," include the covered employee, their current or former spouse, or their dependent child.
Which benefits are covered by COBRA?
Generally, COBRA-eligible individuals are entitled to the same coverage they had under the group health plan right before the qualifying event took place. If the plan allows it, QBs can switch to coverage that is different from what they had prior to the qualifying event.
Ultimately, COBRA health benefits depend on what's offered under the group health plan. The U.S. Department of Labor says that for COBRA purposes, "a group health plan is any arrangement that an employer establishes or maintains to provide employees or their families with medical care, whether it is provided through insurance, by a health maintenance organization, out of the employer's assets on a pay-as-you-go basis or otherwise."
Group health plans typically include the following types of medical care:
- Hospital care, whether inpatient or outpatient.
- Physician care.
- Major medical benefits, such as surgery.
- Dental and vision care.
- Prescription drugs.
- Mental health benefits.
For Affordable Care Act (ACA) compliance, employers with 50 or more full-time employees must offer a group health plan that contains at least 10 essential health benefits — including hospitalization, surgery, prescription drugs, mental health and substance use disorder services, and ambulatory services.
Telehealth programs and employer on-site clinics are considered group health plans and therefore subject to COBRA obligations. Further, employee assistance programs (EAPs) and wellness programs are subject to COBRA if they meet the definition of a group health plan. However, COBRA does not cover plans that offer only life insurance or disability benefits, as these plans are not regarded as medical care.
Are HSAs, health FSAs and HRAs covered by COBRA?
Health savings accounts (HSAs) are not medical plans, so they are not covered by COBRA. With that being said, QBs can use their HSA funds to pay for COBRA premiums.
Health flexible spending accounts are medical plans; therefore, COBRA rules apply, unless there's an exception. However, QBs cannot use their health FSA funds to pay for COBRA premiums.
Health reimbursement arrangements are medical plans, which means they must comply with COBRA unless an exception applies. QBs can use their HRA funds to pay for COBRA premiums if the plan permits it.
Many states have mini-COBRA laws, which apply to employers with fewer than 20 employees. Be sure to check for health benefits that might be subject to continuation under state law. And since COBRA rules are complicated, be sure to get professional advice.
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