13.3 Group Health, COBRA, and HIPAA Portability

Group health insurance covers many people under a single master contract issued to a sponsor—usually an employer. Each covered employee receives a certificate of insurance, not an individual policy. Because the group, not each person, is the unit of underwriting, group coverage is cheaper, often skips individual medical exams, and uses experience rating (pricing on the group's own claims) for larger groups and community rating for smaller ones.

Defining Features of Group Coverage

Exam trap: A legitimate group cannot be formed for the purpose of buying insurance. It must exist for another reason—employment, a union (Taft-Hartley), a trade association, or a multiple-employer trust.

Eligibility, Probationary, and Enrollment Periods

After hire, an employee serves a probationary period (often 30–90 days) before becoming eligible. Once eligible, the worker gets an enrollment period (typically 31 days) to elect coverage.

• Enroll on time → coverage with no evidence of insurability.
• Enroll late (a late entrant) → the insurer may require evidence of insurability or impose a waiting period to deter adverse selection.
• Noncontributory plan (employer pays 100%) → 100% of eligible employees must be covered, eliminating selection.
• Contributory plan (employee shares cost) → a participation threshold, commonly 75%, must enroll.

Worked participation check

A contributory plan covers a firm of 40 eligible employees and requires 75% participation. Minimum enrolled = 0.75 × 40 = 30 employees. If only 26 elect coverage, the group fails the requirement and the insurer can decline or re-rate the plan.

COBRA Continuation

The Consolidated Omnibus Budget Reconciliation Act (COBRA) lets employees and dependents keep group coverage temporarily after a qualifying event. It applies to employers with 20 or more employees. The former member pays the full premium plus an administrative load—up to 102% of the group cost (up to 150% during an 11-month disability extension).

The employer must notify the plan administrator within 30 days of most events; the qualified beneficiary then has 60 days to elect COBRA and 45 days after electing to make the first payment.

State mini-COBRA laws extend similar rights to groups under 20 employees, which federal COBRA does not reach.

HIPAA Portability and Special Enrollment

The Health Insurance Portability and Accountability Act (HIPAA) protects people moving between group plans and guards medical privacy. Its portability rules limit how prior coverage gaps affect new group coverage and guarantee renewability of group plans.

HIPAA special enrollment rights let an eligible person enroll outside the normal window after a triggering event, generally within 30 days (and 60 days for Medicaid/CHIP-related changes):

1. Loss of other coverage (e.g., spouse's plan ends)
2. Termination of the employer's contributions toward other coverage
3. Marriage, birth, or adoption of a dependent
4. Exhaustion of COBRA continuation
5. Loss of or new eligibility for Medicaid/CHIP

Putting the pieces together

An employee is laid off and elects 18 months of COBRA. As COBRA exhausts, HIPAA special enrollment lets the employee join a spouse's group plan within 30 days without a new probationary or pre-existing wait. This COBRA-to-HIPAA handoff is a favorite exam scenario: COBRA buys time, HIPAA provides the bridge to the next group plan. Remember the privacy side too—HIPAA's rules also restrict use of protected health information (PHI).

COBRA timelines you must memorize

COBRA applies to employers with 20 or more employees and continues the identical group coverage after a qualifying event. The exam tests the exact months and the administrative clock:

The cost is up to 102% of the full group premium (100% premium + 2% administrative load); the disability extension period may be charged up to 150%.

The COBRA administrative clock and HIPAA portability

The deadlines are a favorite test item:

• Employer/plan notifies the plan administrator within 30 days of the qualifying event.
• The qualified beneficiary has 60 days to elect COBRA after notice.
• The first premium is due within 45 days of the election.

HIPAA (Health Insurance Portability and Accountability Act) adds: portability (limiting pre-existing exclusions when moving between group plans with prior creditable coverage), special enrollment rights (generally 30 days after events like marriage, birth, or loss of other coverage — 60 days for Medicaid/CHIP gain or loss), guaranteed renewability of group coverage, and privacy protection for protected health information (PHI).

Group structure reminder: the sponsor holds the master contract; members receive certificates; noncontributory plans require 100% participation while contributory plans typically require about 75% to curb adverse selection.