n-98-12.pdf

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COBRA is the Consolidated Omnibus Budget Reconciliation Act of 1985, the law that
1
added the health care continuation coverage requirements.
HIPAA is the Health Insurance Portability and Accountability Act of 1996.
2
Deciding Whether to Elect COBRA Health Care Continuation Coverage After Enactment
of HIPAA
Notice 98-12
INTRODUCTION
A key decision that millions of Americans face each year is whether to elect “COBRA ”
1
health care continuation coverage. The purpose of this notice is to help people decide whether to
elect COBRA coverage. In order to make that decision, they need to know about two laws,
COBRA and HIPAA. This notice provides information -- in the form of questions and answers -
2
- about some factors that employees and their families should take into account in deciding
whether to elect COBRA continuation coverage.
An employer maintaining a group health plan is not required to provide this notice. The
information in this notice may be used by employers and plan administrators who want to
supplement the information they are required to give to covered employees and beneficiaries. The
notice may be modified to provide information specific to a plan. The information in this notice is
not a substitute for any of the notices required to be furnished under COBRA or for any other
information required by law to be furnished to participants or beneficiaries in employer group
health plans.

COBRA is the Consolidated Omnibus Budget Reconciliation Act of 1985, the law that
1
added the health care continuation coverage requirements.
HIPAA is the Health Insurance Portability and Accountability Act of 1996.
2
In most cases, HIPAA is effective by January 1998. However, a later effective date
3
applies to certain employer group health plans and certain health coverage. The questions and
SHOULD I ELECT COBRA HEALTH CARE
CONTINUATION COVERAGE?
Questions and Answers
If you lose or leave your job, or if another event occurs that would cause you
to lose coverage under an employer’s group health plan, you may have the right to
elect COBRA health care continuation coverage under the plan. In making this
1
important decision, there are a number of considerations you should take into
account, including:
!whether other group health coverage -- such as coverage under another
employer’s plan -- is available;
!whether any other available health coverage would exclude benefits for a
medical condition that you or a family member has;
!when you will have the right to enroll in the other coverage;
!the cost, scope, and level of COBRA coverage compared with that of any
other available group coverage or individual health coverage; and
!whether a guaranteed right to buy individual health coverage is important to
you.
The following questions and answers are divided into three parts. Read Part I
for background information about COBRA coverage and an important recent law,
HIPAA
, that might affect your COBRA decision. Read Part II if group health
2
coverage other than COBRA coverage is available to you. Read Part III if you do
not have other group health coverage available. These questions and answers
reflect the law as in effect in January 1998.
3

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answers below assume that HIPAA is in effect.
These questions and answers are available at the IRS Internet site at:
http://www.irs.ustreas.gov
These questions and answers are also available at the Department of Labor
(DOL) Internet site at:
http://www.dol.gov/dol/pwba
and at the Health Care Financing Administration (HCFA) Internet site at:
http://www.hcfa.gov
PART I: Overview of COBRA and HIPAA
COBRA
What rights to health care continuation coverage does COBRA provide?
If you are covered by an employer’s group health plan, COBRA may give
you the right to stay covered even if something happens, like losing your job, that
would otherwise cause you to lose coverage. This continuation coverage under an
employer's plan is called "COBRA coverage." COBRA coverage usually lasts only
for a limited time, and you usually have to pay for it.
If you are covered by an employer's group health plan, and an event occurs
that would otherwise cause you to lose that group health coverage, you need to
understand whether COBRA applies to your specific situation and, if so, what your
rights are under COBRA.
Which employer plans are subject to COBRA
?
COBRA applies to most employer group health plans but not to all of them.

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For example, it does not apply to plans of employers with fewer than 20 employees
or to church plans. Many plans of small employers, though, are subject to State
laws similar to COBRA. If you are covered under a plan of an employer with fewer
than 20 employees, you can contact the department or commission of insurance in
your State to find out if you have rights to continuation coverage under your State’s
insurance laws. (Federal employees, while not protected by COBRA, have similar
continuation coverage rights under another federal law.)
What events result in COBRA rights and for how long is COBRA
coverage available?
Even if COBRA applies to your group health plan, it gives rights only to
certain people who would be losing health coverage for certain specific reasons.
Some of the most common situations that give people COBRA rights are:
!Loss of job. If you are covered by your employer's group health plan
and you lose or leave your job, COBRA generally gives you the right
to stay in the employer’s plan for up to 18 months. The same rights
apply if you are the spouse or dependent child of an employee who
loses his or her job. (The 18-month period can be increased to 29
months if someone in the family is disabled.)
!Reduced hours. If you are covered by your employer's group health
plan and your hours are reduced, the employer's plan may provide that
you lose coverage unless you elect COBRA. In this case, COBRA
generally gives you the right to stay in the employer’s plan for up to 18
months. The same rights apply if you are the spouse or dependent
child of an employee whose hours are reduced. (The 18-month period
can be increased to 29 months if someone in the family is disabled.)
!Death or divorce of spouse. You have the right to COBRA coverage
if you are covered by a group health plan of your spouse's employer
and you would lose coverage because your spouse dies or you and
your spouse divorce or legally separate. In these cases, COBRA gives
you the right to stay in the plan for up to 36 months.
!Death or divorce of parent. You have the right to COBRA coverage

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if you are a dependent child covered by a group health plan of your
parent’s employer and you would lose coverage because your parent
dies or your parents divorce or legally separate. In these cases,
COBRA gives you the right to stay in the plan for up to 36 months.
!Change of Status as Dependent. COBRA also gives you rights if you
are a dependent child covered by a group health plan of your parent’s
employer and you would lose coverage because you reach an age or
condition that causes you to no longer be covered as a dependent under
the plan. In these cases, COBRA gives you the right to stay in the plan
for up to 36 months.
If you become covered by another group health plan or by Medicare before your
COBRA coverage would otherwise end, you usually lose the right to COBRA
coverage. However, you do not lose the right to COBRA coverage if the new group
health plan does not cover illnesses or conditions because you had them before you
became covered under the plan.
What are the requirements for obtaining COBRA coverage
?
If you want COBRA coverage, you can be required to elect it within 60 days
after your coverage would otherwise end. If you elect COBRA coverage, the plan
is required to continue the same coverage for you but can charge you for it.
!Cost of COBRA coverage. If you elect COBRA coverage, the plan
can require you to pay for the entire cost of coverage, plus a small
(2%) additional charge for administration. (If you are getting a longer
period of coverage because of disability, you may have to pay more.)
The cost of COBRA coverage will probably be more than what you
were paying for coverage before. You can pay for COBRA coverage
in monthly installments.
How can I get more information about COBRA
?
COBRA has a number of special rules, and the information above covers only
basic points. The plan administrator of your group health plan is required to give
you information about your COBRA rights. You should read that information

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carefully. If you have any questions about your COBRA rights or would like
additional information about COBRA and your group health plan, contact your plan
administrator.
If you want to know more, the Department of Labor has a booklet called
"Health Benefits under the Consolidated Omnibus Budget Reconciliation Act
(COBRA)." You can request this booklet free of charge by calling 1-800-998-7542.
The booklet is also available on the Internet at:
http://www.dol.gov/dol/pwba
HIPAA
What is HIPAA and why is it important in deciding whether to elect
COBRA coverage?
HIPAA is a federal law that regulates employer group health plans and health
insurance companies. HIPAA is important to your decision whether to elect
COBRA coverage because HIPAA may affect when other coverage is available to
you and the types of other coverage available to you, including the extent to which
coverage can be restricted under a “preexisting condition exclusion.”
What is a preexisting condition exclusion
?
Some employer group health plans do not provide coverage for an illness or
condition you had before you became covered under the plan. These illnesses or
conditions are commonly called "preexisting conditions." A special limit on
coverage for a preexisting condition is called a "preexisting condition exclusion."
How are preexisting condition exclusions limited by HIPAA
?
HIPAA imposes the following limits on the situations in which employer
group health plans may have preexisting condition exclusions and the length of time
that such exclusions can apply:
!Treatment or advice received in 6 months before enrollment. An employer
group health plan cannot exclude coverage for a preexisting condition you

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have unless medical advice, diagnosis, care, or treatment was received by you
(or recommended to you) for the condition during a 6-month period. If there
is a waiting period to get into the plan, the 6-month period is the 6 months
before the start of the waiting period. If the plan has no waiting period, the 6-
month period is the 6 months before you enter the plan.
!Preexisting condition exclusion cannot last for more than 12 (or 18)
months. An employer group health plan cannot exclude coverage for a
preexisting condition for more than 12 months after the start of the waiting
period for coverage. If there is no waiting period, the plan cannot exclude
coverage for a preexisting condition for more than 12 months after you enter
the plan. However, if you do not enroll when you are first eligible and do not
enroll when you have “special enrollment rights” (as described below), the
plan can refuse to cover preexisting conditions for up to 18 months after you
enter the plan.
!Previous coverage reduces length of exclusion. If you had other health
coverage -- for example, under another group health plan (including COBRA
coverage) or under an individual insurance policy, Medicare, or Medicaid --
your new plan's preexisting condition exclusion period generally must be
reduced by the period of your other coverage. For example, if you were
covered by your old employer's plan for 4 months and your new employer's
plan has a 12-month preexisting condition exclusion, your new employer's
plan cannot exclude coverage for you for any preexisting condition for more
than 8 months. However, your new employer’s plan does not have to count
coverage before a 63-day break in coverage.

!63-day break in coverage. If there has been a break of 63 days or more
during which you had no health coverage, then the plan can disregard your
old coverage that preceded this break. Thus, if you had no coverage for at
least 63 days just before you began working for your new employer, the new
employer's plan can refuse to cover any preexisting conditions for up to 12
months (or 18 months, depending on when you enroll in the new plan). Time
spent in any waiting period for coverage does not count toward the 63-day
break.
!No preexisting condition exclusion permitted for pregnancy, or for

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newborn and adopted children. A plan cannot impose a preexisting
condition exclusion relating to pregnancy. In addition, a plan cannot impose
a preexisting condition exclusion on newborn children, adopted children, and
children placed for adoption who are covered under a plan on the 30th day
after their birth, adoption, or placement for adoption.
!State insurance laws. State insurance laws may further limit the extent to
which insurance under an employer’s plan can exclude coverage for
preexisting conditions.
How does HIPAA affect my ability to enroll in an employer’s plan
?
!Special enrollment rights. HIPAA gives you and your family a special
opportunity to enroll in your employer’s plan in two situations: (1) if you lose
other coverage (including COBRA coverage) or (2) if you have a new spouse
or dependent. In these two situations, you (or your spouse or dependent) can
be enrolled in your employer’s plan even if the plan normally would not allow
enrollment at that time.
!Special enrollment because of loss of other coverage. You (and
your spouse and dependents) might have been eligible to enroll in your
employer's plan at an earlier time but you decided not to because at that
time you (or your family members) had other coverage (say, under the
plan of your spouse's employer). In that case, if you (or your family
members) later lose the other coverage, your employer’s plan generally
must allow you (and your family members) to enroll. The plan has to
give you at least 30 days after that other coverage is lost to request
enrollment, and must allow enrollment by the first day of the month
after the plan receives your completed request.
!This special enrollment right generally is available only if the
coverage is lost because it is no longer available (and not lost
because of failure to pay for it or for cause, such as making a
fraudulent claim). You are not required to elect COBRA
coverage in order to have a special enrollment right; however, if
you do elect COBRA coverage, you must continue it for the
entire period it is available to you in order to preserve this

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special enrollment right.
!Special enrollment because of a new spouse or dependent. If you
marry, then you, your spouse, and any new dependents you get as a
result of the marriage have special rights to enroll. If a new child is
born, you adopt a child, or a child is placed for adoption with you, then
you, your spouse, and the new child also get special rights to enroll.
!To be entitled to special enrollment on account of a new spouse
or dependent, you must either be covered under the plan or be
eligible to be covered under the plan. The plan has to give you
at least 30 days after the marriage, birth, adoption, or placement
for adoption to request enrollment.
!If you get married, the plan must cover you, your spouse, and
any new dependent by the first day of the month after the plan
receives your completed request.

!If you have a new child, the plan must cover you and your
spouse and the child from the date of birth, adoption, or
placement for adoption.
!The plan cannot exclude you (or make you pay more) based on health
status. HIPAA prohibits employer group health plans from discriminating in
their eligibility rules on the basis of your health.
!For example, a plan cannot require you to pass a physical examination
before you can enroll in the plan, or prevent you from enrolling
because of your medical claims experience, medical history, genetic
information, evidence of insurability, or disability.
In addition, a plan generally cannot require you to pay a higher contribution
than similarly situated people covered under the plan due to your health or
any of these other factors.
Which Employer Plans Are Subject to HIPAA
?

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HIPAA’s limits on preexisting condition exclusions, special enrollment rights,
and restrictions on discrimination based on health status apply to most but not all
employer group health plans. For example, HIPAA generally does not apply to
plans where fewer than 2 of the participants are current employees. In addition,
special exceptions apply to certain plans maintained by State or local governments
and certain plans maintained by church organizations. Further, the HIPAA rules
generally do not apply to coverage for certain types of excepted benefits.

Where can I get more information about HIPAA
?
HIPAA has a number of special rules, and the information above covers only
basic points. If you want to know more about how HIPAA applies to group health
plans, the Department of Labor has a booklet called "Questions and Answers:
Recent Changes in Health Care Law." You may request this booklet free of charge
by calling 1-800-998-7542. The booklet is also available on the Internet at:
http://www.dol.gov/dol/pwba
More information about HIPAA is also available at the Health Care Financing
Administration (HCFA) Internet site at:
http://www.hcfa.gov
PART II: Should I Elect COBRA Coverage If I Have Other
Group Health Coverage Available?
The questions and answers in this Part are designed to assist you if you have
group health coverage available in addition to COBRA coverage. In deciding
whether to elect COBRA coverage, an important factor is whether the other group
health coverage has a preexisting condition exclusion that applies to you.
How do I know if an employer group health plan has a preexisting
condition exclusion that applies to me?
You should first determine whether you received medical advice, diagnosis,
care, or treatment (or they were recommended to you) for a medical condition

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during the 6-month period before the start of the plan’s waiting period (or before
you enter the plan, if there is no waiting period). For this purpose, only medical
advice, diagnosis, care, or treatment from a physician or other licensed or authorized
person counts.
!If not, the employer's group health plan cannot apply a preexisting condition
exclusion to you.
!If so, contact the plan administrator to find out whether and for how long the
plan excludes your condition. Then, determine whether and to what extent
your prior health coverage will reduce any preexisting condition exclusion
period.

!While you must be notified if the plan has a preexisting condition exclusion
before the exclusion can be applied to you, the plan is not required to give
you this notice before your coverage begins. You have to ask for the
information if you need it earlier.
How do I know how long I will be subject to the plan’s preexisting
condition exclusion?
A plan with a preexisting condition exclusion should specify the maximum
period that the exclusion can apply. That period is reduced by your prior health
coverage, so you will need to determine how much prior health coverage you had.
Remember that if there has been a break of 63 days or more during which you had
no health coverage, then the plan may be able to disregard your old coverage. Time
spent in any waiting period for coverage does not count toward the 63-day break.
!Proof of Previous Health Coverage. Your old plan must give you a
certificate showing how much coverage you had under that plan. The plan
must give you the certificate shortly after you become eligible for COBRA
coverage, shortly after your coverage ends, and at any other time you request
it while you are covered or up to 24 months after your coverage ends. If you
become covered by a plan that has a preexisting condition exclusion, you may
use the certificate to show your new plan how long you had coverage under
your old plan.

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!If you do not have a certificate, you can prove your prior coverage by
producing documentation or other evidence.
!The new plan must notify you of any length of time that a preexisting
condition exclusion may apply to you after counting your previous
coverage.
What should I consider in deciding whether to elect COBRA coverage if
I have other group health coverage available with a preexisting condition
exclusion that applies to me?
If you have other group health coverage available, and that coverage has a
preexisting condition exclusion that applies to you, your choices are to have (1)
COBRA coverage instead of that other group coverage, (2) the other coverage
instead of COBRA coverage (despite the preexisting condition exclusion), or (3)
both COBRA coverage and the other coverage.
Your decision may depend on several factors, such as:
!how long your new coverage will be subject to the preexisting
condition exclusion;
!how likely you are to need treatment for the preexisting condition
before it is covered;
!the seriousness of your preexisting condition, how much the treatment
would cost you in the absence of coverage, and the risks to you if
treatment is delayed;

!the cost, level and scope of benefits of the COBRA coverage compared
to the other coverage; and
!the HIPAA rules that require plans to offer special enrollment rights in
certain cases and prohibit enrollment restrictions based on your health
status (as discussed in Part I and below in this Part II).
What should I consider in deciding whether to elect COBRA coverage if

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I have other group health coverage available with no preexisting condition
exclusion that applies to me?
If you have other group health coverage available that does not exclude
coverage for a preexisting medical condition you have, your decision whether to
elect COBRA coverage may be influenced by a variety of factors, including --
!COBRA cut-off due to other coverage. In general, if you get
coverage from another employer’s group health plan that is not subject
to a preexisting condition exclusion, or from Medicare, your COBRA
coverage can be cut off. This means that in most situations you would
have to decline the other coverage if you decide you prefer the
COBRA coverage. (Note that if you have been receiving disability
payments from Social Security, you should not decline Medicare
coverage without first consulting your Social Security office or the
Medicare program.)
!Cost, scope, and level of coverage. Plans differ in their cost, and in
the level and scope of benefits (such as particular medical services)
they cover. You should take these differences into account in
comparing the COBRA coverage with the other available coverage.
!Employers often pay for a large portion of the cost of group
health coverage for employees, while people on COBRA
coverage typically have to pay for the entire cost of the
coverage. This means it usually is cheaper to pay for the
employee share of the cost of the other coverage than to pay for
COBRA coverage. However, you might prefer more costly
coverage if it provides more comprehensive benefits for
treatment you may need.
!Waiting period before other coverage begins. If you (or your spouse
or parent) get a new job that offers health coverage after some waiting
period, you might want to elect to have COBRA coverage for that
waiting period.
!Special enrollment rights. If you elect COBRA coverage instead of

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taking other available group health plan coverage, HIPAA generally
gives you the right to enroll in the new plan within 30 days after the
COBRA coverage ends, or within 30 days after you get married or
have a new dependent child -- even if the plan would not otherwise
allow you to enroll at that time.
!But, once you have elected COBRA coverage, your special
enrollment right for the loss of the coverage applies only if you
keep the COBRA coverage for the entire period it is available to
you. (Thus, this special enrollment right does not apply if the
COBRA coverage ends because you stop paying for it.)

!HIPAA Limits on Enrollment Restrictions Based on Health Status.
If you elect COBRA coverage instead of taking other group health plan
coverage, but you later decide you want to enroll in the new plan, your
new plan cannot exclude you (or charge you more) on the basis of your
health.
PART III: Should I Elect COBRA Coverage If I Do Not Have
Other Group Health Coverage Available?
The questions and answers in this Part are designed to assist you if you do not
have other group health coverage available.
Why do I need health coverage
?
You need health coverage to help pay for medical services for any health
problems you might have after your current plan coverage ends.
Does HIPAA give me the right to buy individual health coverage
?
If you meet certain requirements, HIPAA gives you the right to buy individual
health coverage with no preexisting condition exclusion, without having to give
evidence of good health. Depending on the State, the individual health coverage
may be a policy issued by an insurance company, or coverage through a State high-
risk pool or other governmental program. You must meet all of the following
requirements to have this right:

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!Your most recent period of health coverage must have been under an
employer group health plan.
!If you were eligible for COBRA coverage (or coverage due to a similar
State provision) under that plan, you must have elected and continued
that coverage for the entire period it was available to you.
!You would not have to continue COBRA coverage for the entire
period to maintain these rights if the only COBRA coverage
available was in an HMO and you ceased to reside, live, or work
in the HMO service area.
!You must have at least 18 months of prior health coverage,
disregarding coverage before a break of 63 days or more during which
you had no health coverage.
!You must not have lost your most recent health coverage because you
failed to pay the premiums or because you committed fraud.
!You must not now be eligible for coverage under any employer group
health plan, Medicare, or Medicaid.
!You must not now have any other health insurance coverage.
For more information on your right to buy individual health coverage, contact your
State’s department or commission of insurance.
What should I consider in deciding whether to elect COBRA coverage
?
!COBRA coverage compared to individual health coverage. In comparing
COBRA coverage with any individual coverage you have available, consider
differences in cost and in the level and scope of benefits (such as particular
medical services) covered.
!COBRA coverage compared to no health coverage. You may want to elect
COBRA coverage to make sure you are covered for any medical services you
need. Many people consider the benefits from having the protection that

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COBRA coverage provides to be well worth the cost of COBRA coverage.
!You might also want to elect COBRA coverage because, in the future,
you could become covered under an employer group health plan that
has a preexisting condition exclusion. If you have a 63-day break in
coverage, then your existing coverage may be disregarded. COBRA
coverage can help you avoid having a 63-day break in coverage and
also counts toward reducing any preexisting condition exclusion. See
Part I for more information on these rules.

!COBRA coverage to protect your right to buy individual health coverage
with no preexisting condition exclusion. As described above, if certain
requirements are met, you and your family may have the right to buy
individual health coverage with no preexisting condition exclusion, without
having to give evidence of good health. These requirements include electing
COBRA coverage as long as it is available to you. THUS, FAILURE TO
ELECT COBRA COVERAGE MAY CAUSE YOU TO LOSE YOUR
GUARANTEED RIGHTS TO PURCHASE INDIVIDUAL HEALTH
COVERAGE.
Is there any State-sponsored coverage available to me
?
Individuals in a family whose income is temporarily reduced (for example,
due to loss of a job) may be eligible for low-cost or no-cost health insurance through
public programs. Children are especially likely to be eligible for low-cost coverage.
Eligibility for these programs varies by State and sometimes within a State. You
can contact State government officials to find out if you are eligible.
CONCLUSION
There are many factors to consider in making the important decision whether
to elect COBRA continuation coverage for you and each of the members of your
family. The information above highlights factors that people in typical
circumstances may want to take into account in deciding whether to elect COBRA
coverage. You will need to consider your own family’s circumstances in making
your decision.