In simple terms, COBRA is a federally offered continuation of health coverage to workers who have lost a job for reasons other than gross misconduct. The coverage offer also extends to their family members.
Per federal guidelines, companies with group health plans with 20 or employees in business for 50 business days the previous calendar year must offer COBRA to eligible former employees, spouses, retirees and dependent children. COBRA recipients must pay for their coverage.
What some employees (and employers) don’t realize, however, is that employers generally have to offer a flexible spending account (FSA) and a health reimbursement account (HRA) with COBRA benefits. In short, laid-off employees cannot be excluded from these programs.
As the Department of Labor notes:
“Qualified beneficiaries must be offered coverage identical to that available to similarly situated beneficiaries who are not receiving COBRA coverage under the plan (generally, the same coverage that the qualified beneficiary had immediately before qualifying for continuation coverage.) A change in the benefits under the plan for the active employees will also apply to qualified beneficiaries. Qualified beneficiaries must be allowed to make the same choices given to non-COBRA beneficiaries under the plan, such as during periods of open enrollment by the plan.”
Of note: with an FSA, an employee who has money left in the account must elect to take COBRA to avoid losing those funds. In most cases, a terminated employee who was offered and who chose to use their COBRA benefits will be treated the same way as a similarly employed employee, with the ability to submit new claims and enjoy the same benefits.
Talk to a Plexus Groupe professional to find out more about COBRA and other employee benefits issues by calling us at 847.307.6100, or visit us online at plexusgroupe.com.
“Frequently Asked Questions: COBRA Continuation Health Coverage.” U.S. Department of Labor, Employee Benefits Security Administration.
“Legislative Brief: Health FSA Carryovers.” Zywave, 2013-2016.