12.3 COBRA, HIPAA, and Continuation

Federal law lets employees keep group health coverage after they would otherwise lose it. The two giants are COBRA (continuation after a qualifying event) and HIPAA (portability and nondiscrimination). The exam wants the size thresholds, the qualifying events, the continuation periods, and the premium rules — these are pure memorization items.

COBRA Basics

The Consolidated Omnibus Budget Reconciliation Act applies to employers with 20 or more employees. It lets qualified beneficiaries (the covered employee, spouse, and dependent children) continue the same group coverage temporarily after a qualifying event that would otherwise end coverage.

The employee pays the full premium plus up to a 2% administrative load (up to 150% during the 11-month disability extension).

COBRA Election Timeline

• The employer notifies the plan administrator within 30 days of the qualifying event.
• The plan administrator notifies the qualified beneficiary within 14 days.
• The beneficiary has 60 days to elect continuation.
• After electing, the beneficiary has 45 days to make the first premium payment.

Worked example: Devon is laid off (not gross misconduct) on June 1. He receives a COBRA election notice and elects continuation. His standard maximum continuation runs 18 months, to roughly December 1 of the following year. If the Social Security Administration finds him disabled within the first 60 days of COBRA, the period extends to 29 months, and the plan may charge up to 150% of the premium for the 11-month extension.

Note that gross misconduct termination is the key disqualifier — it is the one termination reason that voids COBRA eligibility, and it is a favorite exam distractor.

When COBRA Ends Early

Continuation does not always run the full 18, 29, or 36 months. COBRA terminates early if: the premium is not paid on time, the employer stops offering any group plan, the beneficiary becomes covered under another group plan, the beneficiary becomes entitled to Medicare, or the maximum period simply expires. Remember the beneficiary pays the entire premium — the employer no longer contributes its share — which is why COBRA often costs far more than the active-employee payroll deduction did, surprising many test scenarios.

HIPAA Portability and Nondiscrimination

The Health Insurance Portability and Accountability Act protects coverage when workers change jobs:

• Guaranteed issue / renewability in the group market regardless of health status.
• Nondiscrimination — a group plan cannot deny eligibility or charge an individual more based on health factors.
• Special enrollment rights after qualifying events (marriage, birth, loss of other coverage).
• Privacy of protected health information (PHI).

Historically HIPAA limited pre-existing condition exclusions and gave creditable coverage credit, but the ACA eliminated pre-existing condition exclusions entirely for both group and individual coverage, so plans can no longer impose them.

COBRA vs. HIPAA — Quick Contrast

COBRA durations and the 102% premium

COBRA applies to employers with 20 or more employees and lets qualified beneficiaries continue group coverage after a qualifying event. The continuation period depends on the event: 18 months for termination (other than gross misconduct) or reduction of hours; 29 months if the beneficiary is disabled; and 36 months for dependents on events such as divorce, death of the covered employee, or a child aging out. The former member pays the full premium plus a 2% administrative load = up to 102% of the group rate (150% during a disability extension).

Worked example: a $600/month group premium becomes $612 under COBRA (600 × 1.02). The exam's favorite trap is to offer the old employee-share-only figure as a distractor — COBRA shifts the entire premium, both the former employee and employer portions, onto the individual.

HIPAA portability and nondiscrimination

The Health Insurance Portability and Accountability Act (HIPAA) protects workers who change jobs by limiting how new group plans treat pre-existing conditions and by requiring credit for prior creditable coverage, so a continuously insured worker is not subjected to a fresh exclusion period. HIPAA's nondiscrimination rules bar a group plan from charging an individual more or denying eligibility based on a health factor such as a medical condition, claims history, or genetic information. It also mandates special enrollment rights when a worker loses other coverage or gains a dependent.

Layered on top is HIPAA's privacy and security framework, which restricts use and disclosure of protected health information. The exam pairs COBRA (continuation of the same coverage) with HIPAA (portability into new coverage) as the two federal safeguards employees rely on when group coverage changes.