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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 .)


About the author

Karen Hooper

VP, Senior Compliance Manager

Karen Hooper, CEBS, CMS, Fellow, is a Vice President and Senior Compliance Manager working closely with the Lead Benefit Counsel in Newfront's Employee Benefits division. She works closely with internal staff and clients regarding compliance issues, providing information, education and training.


The information provided is of a general nature and an educational resource. It is not intended to provide advice or address the situation of any particular individual or entity. Any recipient shall be responsible for the use to which it puts this document. Newfront shall have no liability for the information provided. While care has been taken to produce this document, Newfront does not warrant, represent or guarantee the completeness, accuracy, adequacy, or fitness with respect to the information contained in this document. The information provided does not reflect new circumstances, or additional regulatory and legal changes. The issues addressed may have legal, financial, and health implications, and we recommend you speak to your legal, financial, and health advisors before acting on any of the information provided.

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