Does an employer with a group health plan need to offer COBRA continuation coverage to former employees or other plan participants who have other coverage at the time that they elect COBRA?
Assume a former employee has been covered under his or her spouse's coverage, or a former employee accepted another job and has since started group coverage with that employer before electing COBRA. Must COBRA coverage be extended once the individual elects COBRA?
Many employers whose plans do not currently offer COBRA under both of these situations will need to change their policies to comply with a recent U.S. Supreme Court decision.
The United States Supreme Court recently answered an open question about employers' obligations to offer COBRA continuation coverage for plan participants who are covered by more than one health plan (Geissal v. Moore Medical Corp., US S. Ct., No. 97-689, 1998 WL 292075). The Court ruled that an employer may not deny COBRA continuation coverage to an employee on the grounds that he or she has already been covered by another health plan prior to making the COBRA election. COBRA may only be denied when the employee becomes covered by another health plan after he or she has elected COBRA continuation coverage.
This is a change from prior decisions in some jurisdictions (including Minnesota) in which the law was interpreted to require employers to offer COBRA to employees already covered by another health plan only if there was a "significant gap" between the coverage of the two plans. The Supreme Court rejected this standard, finding no support for such a rule in the statute.
While this rule will potentially increase plan costs by expanding the class of participants eligible for COBRA, this change is also beneficial to employers in that it will simplify administration of employee benefits plans and COBRA compliance. Plan administrators will not need to compare the level of benefits offered under different health plans to judge "significant gaps" in coverage and will no longer need to investigate other coverage at the time of election.
What does this means for an employer?
An employer's obligation will depend on whether the participant became covered by the second health plan before or after the employee's decision to continue health coverage under the employer's plan through COBRA continuation.
The following is a quick summary of how the Supreme Court's ruling will affect the group health coverage employers must offer under COBRA:
Covered by another health plan before election to continue coverage with the employer under COBRA.
Employer is still obligated under COBRA to offer the participant the opportunity to continue coverage under the employer's plan.
Become covered by another health plan after making an election to continue insurance coverage under COBRA.
Employer is no longer obligated under COBRA to continue to cover the participant and may discontinue COBRA coverage.