12.3 COBRA, HIPAA, and Continuation

COBRA, HIPAA, and Continuation

Federal law gives employees protections when group coverage would otherwise end. The two pillars are COBRA (continuation of the existing group plan) and HIPAA (portability and privacy). Examiners love to contrast them, so keep the dividing line sharp: COBRA lets you stay on the old group plan temporarily; HIPAA protects you when you move between plans and guards health information.

Under COBRA—the Consolidated Omnibus Budget Reconciliation Act—employers with 20 or more employees must offer continued group coverage to qualified beneficiaries after a qualifying event that would end coverage.

COBRA qualifying events and durations

The length of continuation depends on the qualifying event:

Memory aid: voluntary/involuntary termination and reduced hours = 18; disability extension = 29; family-status events (divorce, death, dependent ages out) = 36.

COBRA cost and election windows

The qualified beneficiary pays the full premium plus up to 2% administration—so up to 102% of the group cost (up to 150% during the 11-month disability extension). This is why COBRA is expensive: the employer no longer subsidizes the premium.

Notice/election timeline to memorize:

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

COBRA — Who, When, How Long

COBRA lets employees of firms with 20+ employees continue group coverage after a qualifying event. The beneficiary pays up to 102% of the full premium (the extra 2% is administration).

The employee has 60 days to elect after notice and another 45 days to make the first payment. Coverage is identical to the active plan.

Worked Example: A worker laid off (not for misconduct) gets 18 months of COBRA at up to 102% of the $700 group premium = about $714/month. If she is found disabled within the first 60 days, she may extend to 29 months at up to 150% for the extension period.

HIPAA Protections

HIPAA guarantees portability — prior creditable coverage reduces or eliminates new pre-existing waiting periods — and bars group plans from discriminating based on health status. It also imposes privacy rules on protected health information.

Exam Trap: COBRA applies to employers with 20+ employees; smaller employers often fall under state continuation ("mini-COBRA") laws instead. Gross-misconduct terminations are not COBRA-qualifying events.

HIPAA: portability and privacy

The Health Insurance Portability and Accountability Act (1996) does two distinct jobs:

1. Portability — limits the use of pre-existing condition exclusions when a person moves from one group plan to another and guarantees renewability of group coverage. (The ACA later eliminated pre-existing condition exclusions altogether for most plans, but HIPAA's portability framework remains tested.)
2. Privacy & security — the Privacy Rule and Security Rule protect PHI (protected health information), requiring authorization before disclosure and safeguards for electronic records.

HIPAA also bars group plans from charging an individual a higher premium based on health status—a nondiscrimination protection.

Distinguishing the federal protections

A frequent exam trap is mixing up which law does what. Lock in these anchors:

• COBRA = continuation of the same group coverage after a qualifying event (you keep the plan, you pay the full cost).
• HIPAA = portability between plans + privacy of health information + nondiscrimination on health status.
• FMLA (related, sometimes tested) = up to 12 weeks of unpaid, job-protected leave during which group health coverage must continue on the same terms.

If a question describes someone keeping their old employer's plan after quitting, it's COBRA. If it describes moving to a new employer's plan without a pre-existing exclusion, it's HIPAA.

How COBRA coverage ends early

COBRA is not unconditional for the full 18/29/36 months. Continuation terminates early if any of the following occur:

• The qualified beneficiary fails to pay the premium on time (after the grace period).
• The employer ceases to maintain any group health plan.
• The beneficiary becomes covered under another group plan or enrolls in Medicare.
• The disability that supported the 29-month extension ends.

Exam trap: simply being offered other coverage does not end COBRA—the beneficiary must actually become covered under it. Late payment is the most common early-termination trigger tested.

Mini-COBRA and the small-employer gap

Because federal COBRA applies only to employers with 20 or more employees, many states enacted mini-COBRA (state continuation) laws covering smaller employers, often down to 2 employees. State continuation periods and premium loads vary, but the concept mirrors federal COBRA: continue the group plan temporarily at the member's expense.

A tested boundary: a worker leaving a 12-employee firm has no federal COBRA right, but may have a state continuation right depending on the state. Always check the employee count before concluding COBRA applies.

ERISA's role in the framework

The Employee Retirement Income Security Act (ERISA) is the federal umbrella over private-sector employee benefit plans. It sets fiduciary standards, reporting and disclosure rules (the Summary Plan Description), and grievance/appeals procedures. ERISA is also why most self-funded plans escape state insurance mandates—they are governed federally instead.

For the exam, pair ERISA with the others: ERISA = fiduciary duty and plan administration; COBRA = continuation; HIPAA = portability and privacy; FMLA = leave. Questions that mention 'fiduciary responsibility' or 'Summary Plan Description' point to ERISA.