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Are Retirees Eligible for Cobra?

Health care costs continue to increase. Organizations such as PricewaterhouseCooper (PwC) and Reuters report a 9 percent increase for employer sponsored health plans in the next year. Therefore, losing health coverage as a retiree can be a financially stressful event. Retirees, however, may have the option of COBRA. The Consolidated Omnibus Budget Reconciliation Act, known as COBRA, is Federal legislation that allows a qualified beneficiary to continue the health coverage if coverage is lost.

  1. Qualified Beneficiaries

    • A qualified beneficiary can be an employee, the employee's spouse, employee's dependent child and, in certain cases, a retired employee, the retired employee's spouse and the retired employee's dependent children. The most important stipulation is the qualified beneficiary must be currently covered on the health plan before the qualifying event occurs, and the plan be an employer sponsored plan.

    Qualifying Live Event

    • Situations that may trigger the loss of health coverage include reductions in work hours of an active employee, voluntary or involuntary job loss, divorce, death, and other life events as outlined by the United States Department of Labor. An employee retiring, for example, is considered a voluntary job loss, which would deem the retiree and his or her qualified dependents eligible for COBRA benefits.

    COBRA Election

    • An employer representative, normally a benefits administrator, must notify the COBRA plan administrator of a qualifying life event within 30 days of the event. In the case of an employee retiring, the benefits administrator will submit information within 30 days from the date of retirement to the plan administrator.

      A covered retiree spouse or ex-spouse may also qualify because of a divorce or legal separation from an individual in a covered health plan. The spouse or ex-spouse must notify the COBRA plan administrator within 60 days of the qualifying life event. Documents supporting the life event, such as copies of the divorce papers, may be required at the time of notification.

    Premiums

    • The cost of COBRA is normally 102 percent of the full premium. For a retiring employee, this is more expensive since employers normally subsidize a portion of the premium when actively employed. The premium is cheaper, however, than applying for individual coverage. A retiring employee can use COBRA to supplement his or her insurance before being eligible for Medicare.

      Furthermore, depending on the plan elections, the retiring employee may have the option to select certain plans. For example, dental insurance, medical insurance, and vision insurance are all plans eligible for COBRA. Some employers allow the individual to elect only the coverage needed, such as medical coverage.

    More Information

    • Individuals should review their current summary plan description (SPD) for eligibility requirements. Qualified beneficiaries can also contact their current health plan provider, employer benefits administrator, health plan sponsor or COBRA plan administrator.

      Individuals should also note the continuation of coverage is temporary, and the time frame of continuation depends on the reasons for coverage loss.

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