Open Enrollment for COBRA Beneficiaries

As we near open enrollment for calendar year benefit plans, it is important not to forget about COBRA beneficiaries during this time. Employers are often unaware that the open enrollment rights of active employees also apply to COBRA beneficiaries as they relate to available group health plans. In order to effectively administer COBRA, employers should provide open enrollment materials to COBRA beneficiaries and allow them to make corresponding elections for available group health plans.

In order to inform COBRA beneficiaries about their coverage options, the employer should provide open enrollment documents, including amended certificates of coverage and summary plan descriptions. Just like active employees, COBRA beneficiaries are exploring their coverage options and may want to compare group coverage with other available options in the market. Full disclosure of plan details and upcoming changes is critical to this process. Employers want to avoid a situation where a beneficiary turns down other coverage because of expectations that COBRA coverage will remain the same, only to learn later that certain benefits or costs of the group health plan changed. The employer may not be able to enforce benefit or cost changes that are not communicated in a timely manner.

In addition to receiving enrollment materials, COBRA beneficiaries should be afforded the opportunity to make election choices available to active employees. These choices include the right to add or drop qualifying dependents and group health plan options at open enrollment.

As an example, consider an active employee with a spouse and child. During open enrollment the employee is offered coverage under group health, dental, and vision plans. The employee elects individual health and dental coverage, but declines coverage under the vision plan and declines to cover the spouse or child. The employee terminates employment and is correctly offered COBRA continuation for the coverage effective at the time of the qualifying event – individual health and dental coverage. The employee elects COBRA for the health plan but declines to continue dental coverage.

Three months later it is open enrollment for active employees. At this time, the COBRA beneficiary should be provided the opportunity to enroll in all health benefits available to active employees, even if the beneficiary declined the coverage upon COBRA enrollment (dental) or declined the coverage while an active employee (vision). In addition, the beneficiary should be permitted to add coverage for the spouse and/or the child, even though they were not previously covered.

As the example illustrates, employers need to do more than simply notify COBRA beneficiaries of rate changes at open enrollment. Compliant COBRA administration requires communication of available benefit options to COBRA beneficiaries and the opportunity for them to make group health plan election choices that are also available to active employees.