Enrollment in Group Health Plan after COBRA Subsidy Ends

If an employee receives a COBRA subsidy can they defer enrollment?

Question: Our client has a new employee who is currently enrolled in COBRA subsidized by the prior employer.   The employee wants to remain on COBRA until the subsidy ends 12/21, and then enroll in the current employer’s plan.   Can the employee enroll when the COBRA subsidy ends?

Compliance Team Answer:

There is no special enrollment event when an employer discontinues providing a COBRA subsidy to a former employee.  The HIPAA special enrollment event trigger for loss of COBRA coverage requires that the full COBRA maximum coverage period be exhausted (18 months for termination of employment).

There is no provision in the HIPAA regulations that grants special enrollment rights because an employer terminates its contributions toward COBRA coverage.

The employee will therefore need to choose between:

1. Enrolling in COBRA and having to pay the full amount after the subsidized period ends until the next OE (or, if sooner, until experiencing a permitted election change event); or
2. Enroll in the company’s plan as a new hire instead of taking the subsidized COBRA.

In most cases, the second option will make more sense unless the COBRA subsidy period aligns nicely with OE.

Regulations:

29 CFR Sec. 2590.701-6(a)(3):

(ii)   Termination of employer contributions. In the case of an employee or dependent who has coverage that is not COBRA continuation coverage, the conditions of this paragraph (a)(3)(ii) are satisfied at the time employer contributions towards the employee’s or dependent’s coverage terminate. Employer contributions include contributions by any current or former employer that was contributing to coverage for the employee or dependent.

(iii)   Exhaustion of COBRA continuation coverage. In the case of an employee or dependent who has coverage that is COBRA continuation coverage, the conditions of this paragraph (a)(3)(iii) are satisfied at the time the COBRA continuation coverage is exhausted. For purposes of this paragraph (a)(3)(iii), an individual who satisfies the conditions for special enrollment of paragraph (a)(3)(i) of this section, does not enroll, and instead elects and exhausts COBRA continuation coverage satisfies the conditions of this paragraph (a)(3)(iii). (Exhaustion of COBRA continuation coverage is defined in §2590.701-2 .)