12.3 COBRA, HIPAA, and Continuation

COBRA Continuation Coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) lets employees and dependents keep their group health coverage temporarily after a qualifying event. It applies to employers with 20 or more employees and covers medical, dental, and vision.

The key exam facts are: who qualifies, how long, and at what cost. COBRA coverage must be identical to the coverage active employees have. The continuant pays the full premium — there is no employer subsidy — plus a small administrative load.

Qualifying Events and Durations

Memory hook: events tied to the employee's job (termination, reduced hours) give 18 months; events tied to family status give 36 months. Gross-misconduct termination is not a qualifying event.

COBRA Premium and the Disability Extension

The maximum premium is 102% of the full cost — 100% of the group premium plus a 2% administrative fee. There is no employer contribution.

If a qualified beneficiary is determined disabled (by Social Security) within the first 60 days of COBRA, the 18-month period can extend by 11 months to 29 months total, and the premium during that extension may rise to 150% of the full cost.

COBRA Notice and Election Timeline

The deadlines are heavily tested. Note who acts and the day-count for each step:

Missing the 60-day election window or the 45-day first-payment window forfeits COBRA rights. After election, ongoing premiums get a 30-day grace period.

HIPAA and State Mini-COBRA

HIPAA complements COBRA on the portability side:

• Special enrollment rights when other coverage is lost or on marriage/birth/adoption.
• Creditable coverage — prior coverage historically reduced pre-existing-condition exclusion periods (the ACA later eliminated pre-ex exclusions entirely for compliant plans).
• Privacy and Security Rules protect Protected Health Information (PHI).

State mini-COBRA laws extend continuation to small employers (under 20) that federal COBRA does not reach, often with different durations. When a question gives a fewer-than-20-employee employer, look for the mini-COBRA answer rather than federal COBRA.

Conversion Rights

Separate from COBRA, many group contracts grant a conversion privilege: within 31 days of losing group eligibility, the insured can convert to an individual policy without evidence of insurability.

Conversion benefits may differ from the richer group plan, but it provides a permanent option after COBRA is exhausted.

Sequencing COBRA, Conversion, and the Marketplace

These options can stack. A terminated employee may elect COBRA first (identical coverage for up to 18 months), then convert to an individual policy when COBRA runs out, or shop the ACA Marketplace, where loss of group coverage is itself a qualifying event triggering a special enrollment.

Key timing traps to memorize:

• COBRA election: 60 days; first premium: 45 days after election.
• Conversion: 31 days from loss of group coverage.
• HIPAA / Marketplace special enrollment: 30 days (60 days for Medicaid/CHIP).

Because the windows differ, a single fact pattern can offer multiple correct-sounding answers; pick the option whose deadline matches the specific event described.

Who Is a Qualified Beneficiary?

COBRA rights belong to a qualified beneficiary — someone covered under the group plan the day before the qualifying event: the employee, a covered spouse, and covered dependent children. A child born to or adopted by a covered employee during the COBRA period is also a qualified beneficiary.

Each qualified beneficiary has an independent election right. A spouse may elect COBRA even if the former employee declines it. This matters in divorce: the ex-spouse, as a qualified beneficiary, can independently continue coverage for up to 36 months, paying the 102% premium directly, regardless of the employee's choice.

When COBRA Ends Early

COBRA is temporary, and coverage can terminate before the 18- or 36-month maximum if:

• The qualified beneficiary fails to pay a premium within the 30-day grace period.
• The employer ceases to maintain any group health plan for all employees.
• The beneficiary becomes covered under another group plan (with no applicable pre-existing-condition limit) or enrolls in Medicare.
• The beneficiary commits fraud (e.g., a falsified claim).

A frequent exam scenario: a continuant gets a new job with health benefits during month 6 of COBRA — the employer may terminate the COBRA coverage because other group coverage now exists. COBRA is a bridge, not a permanent substitute, and any early-termination event ends it ahead of schedule.