Comments on COBRA

Comments on COBRA: the Geissal Case

Thomas P. McCormick, Esq. Director

Employee Benefits Institute of America LLC P.O. Box 7307 Seattle, WA 98133-2307 (206) 546-6810 www.ebia.com

(Comments posted to Benefits-L mailing list)

The U.S. Supreme Court decision in Geissal requires group health plans to offer COBRA coverage to all covered employees, spouses and dependent children who lose coverage as a result of a qualifying event, even if they have other group health plan coverage before electing COBRA.

Our Manual, COBRA: The Developing Law (EBIA 1990-1998), has advocated the above rule since 1990. And we have pointed out, at Section VI.C., that the rule isn't limited to those who have other coverage at the time of their qualifying event: "An employee can terminate employment, find a job with a new employer, become covered under that new employer's plan, and (regardless whether the new employer's plan has exclusions or limitations for preexisting conditions) thereafter elect COBRA under the old employer's plan [subject, of course, to the 60-day election period]. Because the employee [first] becomes covered under the new employer's plan before the [employee elects] COBRA, the [old employer's plan must provide] COBRA coverage [for up to the maximum 18-month COBRA period]."

As the U.S. Supreme Court in Geissal made clear, "it is true that if during the interim between the qualifying event and election a beneficiary gets a new job, say, with health coverage (having no exclusion or limitation for his condition), he will have the benefit of COBRA, whereas he will not have it if his new job and coverage come after the election date."

MEDICARE ENTITLEMENT

If an employee has Medicare when he or she terminates employment, our view has always been that the employee must be offered COBRA. We have stated in our Manual, COBRA: The Developing Law, that it would be "aggressive" to refuse to offer COBRA in such a case.

While the U.S. Supreme Court in Geissal didn't directly address the Medicare dual coverage issue (the case involved other group health plan coverage, not Medicare coverage), it is clear to us that, based on the Court's literal construction of the COBRA statute and its reference to Medicare in footnote 10 of the decision, COBRA must also be offered to qualified beneficiaries who become entitled to Medicare before electing COBRA.

Note further that the IRS, in IRS Announcement 98-22 (March 4, 1998), issued in connection with the U.S. Supreme Court's review of the Geissal case, now takes the view that "the better interpretation of the statute is that a plan is not permitted to cease making COBRA coverage available merely because of other coverage (or entitlement to Medicare benefits) that began before the date of the election for COBRA coverage."

As is the case with other group health plan coverage discussed above, note that the COBRA obligation isn't limited just to those who became entitled to Medicare before their qualifying event. Consider the following: (i) George quits 30 days before turning age 65 and is offered COBRA (as required), (ii) half-way through his COBRA election period, George still hasn't elected COBRA but becomes entitled to Medicare, (iii) George soon realizes that Medicare doesn't cover all of his medical and dental expenses, and sends in all the COBRA paperwork to elect COBRA within the 60-day election period. The plan must provide the elected COBRA coverage. George gets to continue his COBRA coverage for as long as he pays the premium (for up to the maximum 18-month COBRA period).

As a final note: Medicare entitlement means the person is enrolled in Medicare and thus has Medicare coverage. Folks may be eligible for Medicare, but they are not entitled to Medicare until they enroll.

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