12.3 COBRA, HIPAA, and Continuation

When group coverage would otherwise end, federal law gives employees and dependents ways to keep or transfer coverage. The two laws the exam tests hardest are COBRA (continuation of the same group coverage) and HIPAA (portability, privacy, and nondiscrimination). Keep their roles separate: COBRA continues the existing group plan; HIPAA protects a person moving between plans.

COBRA Continuation

The Consolidated Omnibus Budget Reconciliation Act of 1985 requires employers with 20 or more employees to offer continued group health coverage to qualified beneficiaries who experience a qualifying event that would end coverage. The individual pays the full premium, and the plan may add a 2% administrative charge, so the cost is up to 102% of the group rate (up to 150% during the 11-month disability extension).

Qualifying Events and Maximum Continuation Periods

Exam trap: 18 months = events tied to the employee's job (termination, reduced hours). 36 months = events tied to family status or the employee leaving the picture (death, divorce, Medicare entitlement, child aging out). The disability extension to 29 months (18 + 11) is the in-between answer.

COBRA Notice Timeline

• The employer must notify the plan administrator within 30 days of a qualifying event it knows about (termination, death, reduced hours).
• The qualified beneficiary must notify the administrator within 60 days for events the employer would not know about (divorce, child aging out).
• The administrator then has 14 days to send an election notice.
• The beneficiary has 60 days to elect, and 45 days after electing to make the first premium payment.

HIPAA

The Health Insurance Portability and Accountability Act of 1996 does several distinct things. The exam expects you to recognize each.

• Portability — limits pre-existing condition exclusions and credits prior creditable coverage, so time spent under a prior plan reduces or eliminates a new plan's exclusion period. (Note: the ACA later barred pre-existing condition exclusions outright for most plans, but HIPAA's portability concept is still tested.)
• Guaranteed issue and renewability — protects small groups and certain individuals from being denied or non-renewed because of health status.
• Nondiscrimination — a plan may not charge one similarly situated individual a higher premium than another based on a health factor.
• Privacy and security — the Privacy Rule and Security Rule protect protected health information (PHI), the part of HIPAA most people recognize.

COBRA vs. HIPAA at a Glance

Conversion Privilege

Many group plans also include a conversion privilege: a terminating employee may convert group coverage to an individual policy without evidence of insurability, usually within 31 days of losing group coverage.

The converted individual policy is typically more expensive than the group rate and may offer narrower benefits, but the key advantage is that it requires no proof of good health. Conversion and COBRA are separate rights; a beneficiary may use COBRA first and then convert when COBRA runs out, depending on plan terms.

Qualifying Events, Beneficiaries, and the Election Window

COBRA's continuation length depends on the qualifying event. Termination (other than for gross misconduct) or reduced hours gives the employee and dependents 18 months; a second qualifying event, the employee's death, divorce, Medicare entitlement, or loss of dependent-child status can extend dependents to 36 months. A qualified beneficiary has 60 days to elect COBRA after notice and 45 days thereafter to make the first premium payment.

HIPAA Portability and Nondiscrimination

HIPAA bars group plans from using health status to deny eligibility or charge an individual more than similar enrollees, guarantees access in the small-group market, and (in its privacy rule) protects Protected Health Information (PHI). After the ACA eliminated most pre-existing condition exclusions, HIPAA's creditable-coverage offset is largely historical, but its privacy and nondiscrimination provisions remain heavily tested.

Worked COBRA Cost and Duration

An employee earning group coverage at a true cost of $700 per month is laid off. Under COBRA she pays up to 102% -- $714 per month -- for up to 18 months. If the Social Security Administration deems her disabled within 60 days of the event, the family may extend to 29 months, and during the 11-month disability extension the plan may charge up to 150% ($1,050). She must elect within 60 days of the COBRA notice.

Additional Exam Traps

• COBRA applies to employers with 20+ employees; smaller employers fall under state mini-COBRA.
• Termination yields 18 months; divorce/death extend dependents to 36 months.
• COBRA premium is up to 102% (150% during disability extension), not the group's employer-subsidized rate.