COBRA BASICS

1. COBRA BASICS Presented by University of Wisconsin System Administration � Office of Human Resources May, 2006

2. COBRA Basics What is COBRA? COBRA stands for Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986. COBRA applies to employers with 20 or more employees. COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates.� This coverage, however, is only available when coverage is lost due to certain specific events.�

3. COBRA Basics Who is eligible for COBRA? Qualified Beneficiaries - An individual covered by a group health plan on the day before a qualifying event who is an employee, the employee's spouse or dependent child.� In certain cases, a retired employee, the retired employee's spouse, and the retired employee's dependent children may be qualified beneficiaries.� Any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary.�

4. COBRA Basics COBRA must be offered if there is a qualifying event. A qualifying event for an employee is: Voluntary or involuntary termination of employment for reasons other than gross misconduct. Termination of employer contribution (reduction of the employer contribution does not qualify). A voluntary cancellation of coverage does not qualify for COBRA continuation.

5. COBRA Basics Qualifying events for dependents are: The voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct Loss of employer contribution (reduction in the contribution does not qualify) Divorce or legal separation of the covered employee Death of the covered employee Loss of dependent child status Voluntary cancellation of coverage does not qualify.

6. COBRA Basics What are the notification requirements for COBRA? Employees must be notified of their COBRA rights within 90 days of the coverage effective date. This requirement is met by way of the notice located in Section B of the It�s Your Choice booklet. Plan participants and beneficiaries must be sent an election notice not later than 14 days after the plan administrator (the employer) receives notice that a qualifying event has occurred.�

7. COBRA Basics The individual then has 60 days to decide whether to elect COBRA continuation coverage.� If the individual initially declines to continue coverage, he or she may change his or her mind within the 60-day election period. The person has 45 days after electing coverage to pay the initial premium. Each covered individual has an independent right to elect continuation (if there are only two individuals electing continuation, two single plans will be less expensive than one family plan).

8. COBRA Basics When the employer does not know about the qualifying event: A qualified beneficiary must notify the campus benefits office of a qualifying event within 60 days after divorce or legal separation or a child's ceasing to be eligible as a dependent under plan rules. Failure to do so will result in the dependent�s loss of eligibility for COBRA continuation. Dependents must be notified of COBRA rights even if they are not eligible. Important Notes: Under State law, coverage for an ex-spouse remains in force until the ex-spouse is notified of the continuation rights, provided family premiums continue to be paid. Coverage for the ex-spouse (and any step-children) ends at the end of the month in which the employer is notified of the event. Employees should not terminate family coverage in anticipation of a divorce as the employee may be liable for medical expenses incurred by the spouse.

9. COBRA Basics Important Notes: Under State law, coverage for an ex-spouse remains in force until the ex-spouse is notified of the continuation rights, provided family premiums continue to be paid. Coverage for the ex-spouse (and any step-children) ends at the end of the month in which the employer is notified of the event. Employees should not terminate family coverage in anticipation of a divorce as the employee may be liable for medical expenses incurred by the spouse.

10. COBRA Basics There is no change in premium when continuing coverage - but there is no employer contribution. (Under COBRA, the employer may charge up to 102% of the active employer premium, but the State does not charge the additional 2%.) A qualified beneficiary electing to continue coverage will remain in the same health plan. There can be no lapse of coverage, so all back premiums must be paid. Individuals on continuation have all of the same rights as active members. They also may change plans annually during Dual-Choice.

11. COBRA Basics If a dependent child does not live in the same county as the employee, he or she may select a different health plan at the time he or she elects to continue coverage. If an individual moves while on continuation, he or she may select a different health plan by notifying ETF within 30 days of the move. If a graduate assistant accepts a permanent WRS position, he may continue the graduate assistant coverage until the employer contribution begins in the new appointment. If the position is unclassified, the employer contribution begins on the first of the month after the application is submitted. As such, no continuation will be offered.

12. COBRA Basics How long does COBRA coverage continue? Federal law requires that the former employee be allowed to continue coverage for 18 months. Under the State Group Health program, however, all qualified beneficiaries may continue coverage for up to 36 months. Because the employer contribution is paid two months in advance, qualified beneficiaries actually have an additional 34 months of continuation available. 36 months � the two months premium is paid in advance = 34 months remaining under COBRA.

13. COBRA Basics Under what circumstances might COBRA coverage end before the end of the 36-month period? If premiums are not paid on a timely basis After the COBRA election, coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary.� The employer ceases to maintain any group health plan.

14. COBRA Basics What is conversion? At the end of COBRA coverage, the participant must be given the option of converting to an individual policy. The health plan must provide notice of the option to enroll in a conversion health plan within 180 days before COBRA coverage ends.� The premium for a conversion policy will be more expensive than the premium of a group plan, and the conversion policy may provide a lower level of coverage.� The conversion option, however, is not available if the beneficiary ends COBRA coverage before reaching the end of the maximum period of COBRA coverage.

15. COBRA Basics Does the employee get COBRA benefits while on FMLA leave? The Family and Medical Leave Act requires an employer to maintain group health coverage for an employee on FMLA leave just as it would have provided if the employee had continued working.� Coverage provided under the FMLA is not COBRA coverage, and FMLA leave is not a qualifying event under COBRA.� A COBRA qualifying event may occur, however, when an employer's obligation to maintain health benefits under FMLA ceases, such as when an employee notifies an employer of his or her intent not to return to work.

16. COBRA Basics In addition to COBRA, there is also state continuation (S. 632.897, Wis. Stats). Under state continuation, the member must be covered for three months before the qualifying event. The state provides for 18 months of continuation. This runs concurrently with COBRA, if both apply.

17. COBRA Basics COBRA and state continuation under s. 632.897, Wis. Stats., do not apply to life insurance plans. Group life insurance plans may offer continuation, but must offer conversion under s. 632.57, Wis. Stats.

18. COBRA Basics Which benefit programs require COBRA notices? Health Insurance � ET-2311 (rev. 4/05) May continue coverage for up to 36 months Epic � E11472 Must be covered for 3 months May continue coverage for up to 36 months Retirees have own plan so not limited to 36 months Dental* � UWS-8 or OSER-DCLR-216 (12/05) May continue coverage for up 18 months if the employee terminates employment. May continue coverage for up 36 months if the dependent loses eligibility or employee dies. Retirees may continue indefinitely AD&D* � UW1249 (at retirement only) UIA � F.UW1443 ERA - ET-1518 *Domestic Partners are eligible for continuation

19. COBRA Basics Which plans offer only conversion to an individual plan? State Group Life+ Individual and Family Life* UW Employees, Inc.* AD&D (except at retirement)* +Eligible employees may continue coverage, although coverage is reduced per plan provisions. *Domestic Partners are eligible for conversion Note: These plans are not subject to COBRA.

20. COBRA Basics Questions? Contact your campus staff benefits office.