The type of qualifying event will determine who the qualified beneficiaries are. Under COBRA, six events can be qualifying events if they result in loss of coverage. These six events and the length of coverage they trigger are:

• Death of the covered employee (spouse and dependent child of covered employee are covered for up to 36 months).
• Termination (other than by reason of gross misconduct) or reduction of hours of the covered employee’s employment (coverage for up to 18 months for covered employee, spouse and dependent child).
• Divorce or legal separation of the covered employee from the employee’s spouse (former spouse and dependent child covered for up to 36 months).
• The covered employee becomes entitled to benefits under Medicare (coverage for up to 36 months for the covered spouse and dependent child).
• The dependent child ceases to be a dependent under the requirements of the plan (coverage for up to 36 months for the formerly dependent child).
• An employer’s bankruptcy, but only as it relates to health care coverage for retirees and their dependents (coverage for up to 36 months).1

• California law requires health plans and insurers to offer individuals extended COBRA coverage up to a combined total of 36 months if those individuals have exhausted COBRA coverage.

Multiple qualifying events can occur and cause COBRA coverage to be extended. If a second qualifying event occurs during the period of COBRA coverage triggered by the first qualifying event (for example, the death of a covered employee within the coverage period triggered by a reduction in hours), coverage may be extended to a maximum of 36 months from the first qualifying event. This extension is required only if the second qualifying event would have created an entitlement to 36 months’ coverage if it had occurred before the first qualifying event.2

Example: John Smith lost his job on January 1, 2016. He elected coverage for himself and his family. On January 1, 2017, after 12 months of continuous COBRA coverage, John died. His family can continue coverage beyond the original 18 months’ entitlement by an additional 18 months, until December 31, 2018. Had John lived, coverage for all would have ended no later than June 30, 2017.

The law provides that one of these listed events causes a loss of coverage triggering COBRA when, under a plan’s terms, the terms and conditions of coverage are different than what was in effect immediately before the qualifying event. Loss can occur anytime within the maximum COBRA coverage period.3 An increase in premiums due to the qualifying event is also a loss of coverage.4 If you continue an employee on a plan after termination, but at an increased cost to the employee, that constitutes a loss of coverage for COBRA purposes.

Business Reorganizations and COBRA

Business reorganizations, such as a business closing, selling assets or outright selling a business’s stock, can trigger COBRA rights when employees are terminated. Business reorganizations also can end COBRA obligations when there are no surviving health plans within related organizations.5 Seek legal counsel about COBRA considerations before proceeding with a business reorganization.

COBRA Extension for Disabled Beneficiaries and Their Dependents

As interpreted by the IRS, COBRA provides that:6

• If one qualified beneficiary is disabled, all qualified beneficiaries in that family are entitled to an additional 11 months of coverage. COBRA provides that the premium charged to non-disabled beneficiaries need not be 150 percent if the plan offers a premium category that allows the disabled qualified beneficiaries to be separately classified.7
• The Social Security Administration (SSA) need not make a determination that a qualified beneficiary is disabled at the time of the qualifying event. A determination of disability can occur at any time before the 60th day of COBRA coverage.
• An additional 11 months of coverage is available when the disabled person is any qualified beneficiary, not a former employee. For example, a man’s employment terminates and, 30 days later, his wife is in a car accident. The SSA determines her to be totally disabled as a result of the accident. She can get the extended coverage in her own right, and her husband also can continue his COBRA coverage for the same extended period.

To receive an extension, a qualified beneficiary must notify your plan administrator of the SSA’s disability determination no later than 60 days after the determination date and within the original 18-month COBRA period. If the SSA should subsequently notify the disabled, qualified beneficiary that he/she is no longer disabled, the qualified beneficiary should notify your plan administrator within 30 days. From that time forward, as of the first of the month — and at least 30 days after notice — COBRA coverage will end for all qualified beneficiaries if coverage is within the extension period.

1. 29 U.S.C. 1163

2. Treas. Reg. sec. 54.4980B-7, Q&A-6

3. Treas. Reg. sec. 54.4980B-4, Q&A-1(c)

4. Treas. Reg. sec. 54.4980B-4, Q&A-1(c)

5. Treas. Reg. sec. 54.4980B-9

6. 63 FR 708 (January 1, 1998)

7. Treas. Reg. sec. 54.4980B-8(b)