Question: What events causing a loss of health coverage can trigger a COBRA qualifying event? 

Short Answer: Not all losses of health coverage create COBRA rights.  Only a loss of health coverage caused by one of the COBRA triggering events creates a qualifying event to continue coverage through COBRA. 

General Rule: COBRA Qualifying Event for Continuation Coverage 

Individuals have the right to continue group health plan coverage through COBRA upon experiencing a “qualifying event,” which is a loss of coverage triggered by one of the prescribed COBRA triggering events.  Individuals who experience a COBRA qualifying event are referred to as “qualified beneficiaries”. Group health plans subject to COBRA include medical, dental, vision, health FSA, HRA, most EAPs, and certain wellness programs and on-site medical clinics. 

• For more details: Newfront COBRA for Employers Guide 

COBRA Triggering Events 

There are two requirements for a COBRA qualifying event: 

1. Loss of group health plan coverage; 

2. Caused by a COBRA triggering event. 

Not all losses of coverage are a COBRA qualifying event.  Qualified beneficiaries have COBRA continuation coverage rights only if they experience a qualifying event.  The event causing the individual’s loss of coverage must be one of the listed triggering events set forth by COBRA to constitute a qualifying event. 

The primary COBRA triggering events are: 

1. Covered Employee’s Termination of Employment 

2. Covered Employee’s Reduction of Hours 

3. Divorce or Legal Separation 

4. Loss of Dependent Child Status (e.g., Child Reaching Age 26) 

5. Death of Covered Employee 

6. Failure to Return from FMLA Leave 

COBRA Triggering Event #1: Covered Employee’s Termination of Employment 

Qualified beneficiaries experience a COBRA qualifying event where their loss of coverage is caused by the employee’s termination of employment.  This is the most common triggering event, allowing for up to 18 months of COBRA coverage.  

Whether the termination of employment was voluntary or involuntary is irrelevant for COBRA purposes—either type is a triggering event.  The only exception is that employees do not experience a COBRA qualifying event if their loss of coverage is caused by a termination of employment that is “by reason of the employee’s gross misconduct.”    

However, in light of the ambiguity surrounding what qualifies as “gross misconduct” for purposes of this exception, the numerous cases where courts have found the exception does not apply despite serious misfeasance, and the high litigation risk that comes with a COBRA gross misconduct denial, employers should generally offer COBRA whenever an employee loses coverage as a result of termination of employment absent the most outrageous possible forms of gross misconduct imaginable.  

• For more details: The COBRA Gross Misconduct Exception 

 COBRA Triggering Event #2: Covered Employee’s Reduction of Hours 

Qualified beneficiaries experience a COBRA qualifying event where their loss of coverage is caused by the covered employee’s reduction of hours, allowing for up to 18 months of COBRA coverage.  This event applies where the employee’s hours of service are no longer sufficient to maintain health plan eligibility.    

Note that employers will need to consider the ACA employer mandate implications of when it is appropriate for an employee who reduces hours to lose health plan eligibility.  

For more details: 

• The ACA Look-Back Measurement Method 

• Loss of Health Plan Eligibility Caused by Move to Part-Time Work 

• Newfront ACA Employer Mandate & ACA Reporting Guide 

COBRA Triggering Event #3: Divorce or Legal Separation  

Qualified beneficiaries experience a COBRA qualifying event where their loss of coverage is caused by the divorce or legal separation of the covered employee from the employee’s spouse.  This is an extended 36-month maximum coverage period qualifying event for the spouse.  

Some health plans terminate a spouse’s eligibility at the point of a court-ordered legal separation—if one occurs prior to a final divorce.  The spouse will have COBRA rights regardless of whether the spouse’s coverage is lost as a result of legal separation or final divorce.  The employee or spouse must notify the plan within 60 days of the court-ordered legal separation or divorce to preserve the spouse’s COBRA rights.  

For more details: 

• COBRA Rights for Legal Separation vs. Divorce 

• How to Address Late Legal Separation and Divorce Notifications 

It is not uncommon for employees to argue they should be able to continue active coverage for a former spouse based on the terms of a state court’s divorce order.  However, any state court order attempting to require an employee to continue active coverage for a former spouse is preempted by ERISA and therefore not enforceable against the plan.  The order simply has no effect.  Outside of limited exceptions for fully insured plans sitused in states with unusual continuation mandates (e..g, Massachusetts), the plan terms providing that the spouse loses active coverage upon legal separation/divorce will govern.  

For more details: 

• Court Orders Purporting to Require Coverage for Former Spouses are Unenforceable 

• Newfront ERISA for Employers Guide 

Note that there is a special COBRA qualifying event rule that applies where an employee drops a spouse from coverage (e.g., at open enrollment) in anticipation of their divorce.  In that case, the spouse will have COBRA rights as of the date the divorce is subsequently finalized.  This will create an unusual gap in coverage between the employee dropping the spouse and the divorce being finalized.  (In almost all other situations COBRA will provide continuous, seamless coverage from the point of loss of active coverage.)  

• For more details: COBRA Rights When Dropping a Spouse in Anticipation of Divorce 

COBRA Triggering Event #4: Loss of Dependent Child Status (e.g., Child Reaching Age 26)  

The employee’s covered children experience a COBRA qualifying event where their loss of coverage is caused by ceasing to qualify as an eligible dependent under the terms of the plan.  This is an extended 36-month maximum coverage period qualifying event for the affected children.  

The ACA’s Age 26 Mandate requires that a health plan offering dependent coverage for children make that coverage available until the child reaches age 26.  Accordingly, this COBRA qualifying event most commonly is triggered by the child reaching age 26 and losing health plan eligibility.  

• For more details: The ACA Age 26 Mandate 

In some situations, post-age 26 children who are disabled may be eligible to continue active coverage if they meet the plans definition and conditions to qualify.  

• For more details: Post-Age 26 Coverage for Disabled Children 

Note that the ACA Age 26 Mandate does not apply to ACA “excepted benefits,” which includes most dental and vision plans.  Although employers often apply a uniform child eligibility structure whereby children also remain eligible for dental/vision coverage until reaching age 26, some dental/vision plans still impose the pre-ACA eligibility standard based on the tax dependent definition—requiring that the child be under age 19, or under age 24 if a full-time student.  In those situations, a child losing coverage prior to age 26 will have COBRA rights for dental and vision even if they are still eligible for active medical coverage.  

• For more details: ACA and HIPAA Excepted Benefits 

COBRA Triggering Event #5: Death of Covered Employee 

Qualified beneficiaries experience a COBRA qualifying event where their loss of coverage is caused by the covered employee’s death.  This is an extended 36-month maximum coverage period qualifying event for the surviving spouse and children.  

• For more details: COBRA for an Incapacitated or Deceased Qualified Beneficiary 

If the employee’s death occurs during the 18-month COBRA maximum coverage period caused by a termination of employment or reduction of hours qualifying event, the surviving spouse and dependents who are COBRA qualified beneficiaries experience a second qualifying event.  The second qualifying event extends the maximum coverage period from 18 months (based on the original termination of employment or reduction of hours qualifying event) to 36 months for the spouse and dependents.  The 36-month maximum coverage period runs from the start date of the original 18-month maximum coverage period—not from the date of the employee’s death that caused the second qualifying event.  

• For more details: COBRA Second Qualifying Events 

COBRA Triggering Event #6: Failure to Return from FMLA Leave 

Qualified beneficiaries experience an 18-month COBRA qualifying event where their loss of coverage is caused by the covered employee’s failure to return to work at the end of an FMLA leave.  

If an employee fails to return from FMLA leave, active coverage will generally terminate as of the end of the last day of the FMLA leave—absent a company policy to extend coverage beyond the protected leave period.  In that situation, the employee (and any covered spouse/dependent) experiences a COBRA qualifying event as of the last day of the FMLA leave.  

If coverage terminates prior to the end of the protected leave because the employee fails to timely pay the required employee-share of the premium, there will be a coverage gap from the loss of coverage until the last day of the FMLA leave when the qualifying event occurs.  (In almost all other situations COBRA will provide continuous, seamless coverage from the point of loss of active coverage.)  

For example, if the employee’s coverage terminated as of the end of September for failure to timely pay while on leave, and the employee exhausted FMLA and failed to return as of November 1, the month of October would be a coverage gap under the employer-sponsored group health plan.  The employee’s active coverage would have run through September, but COBRA rights would not be available until November 1 (the date of the qualifying event) when the employee failed to return to work.  

For more details: 

• Newfront Health Benefits While on Leave Guide 

• Late Health Plan Payments While on FMLA Leave 

• Health Benefits During a Protected Leave 

Other COBRA Triggering Events That Rarely Occur 

Qualified beneficiaries covered under a retiree health plan experience a qualifying event if their loss of coverage is caused by the employer undergoing a Chapter 11 bankruptcy.  This (rarely applicable) event allows the qualified beneficiaries to continue retiree coverage through COBRA under a remaining health plan (if any) maintained by the employer’s controlled group.  

Qualified beneficiaries also experience a qualifying event if their loss of coverage is caused by the employee’s Medicare enrollment.  However, most employers (generally 20+ employees) are subject to the Medicare Secondary Payer rules that prohibit the employer from taking into account the Medicare entitlement of the employee.  Accordingly, in most situations the employee’s Medicare enrollment cannot cause the employee to lose coverage, and therefore cannot trigger COBRA rights.  On the other hand, COBRA rights are generally cut short by the individual’s enrollment in Medicare after electing COBRA.  

For more details: 

• Newfront Medicare for Employers Guide 

• Early Termination of COBRA Upon Enrollment in Medicare 

 Events That Extend the COBRA Maximum Coverage Period 

The COBRA maximum coverage period for a qualifying event is generally determined by the type of triggering event that caused the loss of coverage, as follows:  

18-Month Maximum Coverage Period: 

• Termination of employment 

• Reduction of hours 

• Failure to return from FMLA leave 

 29-Month Maximum Coverage Period: 

• Disability extension 

 36-Month Maximum Coverage Period: 

• Death of employee 

• Divorce or legal separation from employee (including removal in anticipation) 

• Loss of dependent status (e.g., child reaching age 26) 

Extended Maximum Coverage Period Event #1: Disability Extension 

The COBRA disability extension is available to extend the maximum coverage period from 18 months to 29 months where 1) the COBRA qualifying event is the employee’s termination of employment or reduction in hours, 2) the qualified beneficiary is determined by the Social Security Administration (SSA) to have been disabled at any time during the first 60 days of COBRA coverage, 3) the qualified beneficiary notifies the plan of the SSA determination within 60 days of the SSA determination, and 4) the qualified beneficiary notifies the plan of the SSA determination before the end of the 18-month standard maximum coverage period.  

• For more details: The COBRA Disability Extension 

Extended Maximum Coverage Period #2: Medicare Enrollment Extension 

There is an unusual provision that extends the COBRA maximum coverage period for the covered spouse and dependents of employees who enroll in Medicare shortly before the loss of employer-sponsored coverage caused by termination of employment (e.g., retirement) or reduction in hours.  The COBRA maximum coverage period extension under this special pre-qualifying event Medicare enrollment rule is the later of 1) 36 months from the date the employee enrolled in Medicare, or 2) 18 months from the date of the termination or reduction in hours that caused the loss of coverage (the qualifying event).  

Therefore, this special rule will apply to extend the standard 18-month COBRA maximum coverage period for the spouse and dependents only where the employee enrolls in Medicare within 18 months of the termination or reduction in hours that caused the loss of coverage (the qualifying event).  

• For more details: The Medicare Enrollment COBRA Extension 

Extended Maximum Coverage Period #3: Second Qualifying Event Extension 

The COBRA second qualifying event rules permit a spouse or dependent qualified beneficiary to extend the COBRA maximum coverage period from 18 to 36 months where 1) the original qualifying event was the employee’s termination of employment or reduction of hours, and 2) within that 18-month maximum coverage period, a second qualifying event occurs.  A second qualifying event can be the death of the employee, divorce or legal separation from the employee, or the loss of dependent child status.  

• For more details: COBRA Second Qualifying Events 

Extended Maximum Coverage Period #4: State Mini-COBRA Extension 

Some states offer an extension of continuation coverage through state mini-COBRA rules that applies after the qualified beneficiary has exhausted the federal COBRA maximum coverage period.  These state mini-COBRA extensions apply only to fully insured policies sitused in that state.  For example, qualified beneficiaries covered under a fully insured major medical policy sitused in California can extend the 18-month events by another 18 months (for a total of 36 months) through Cal-COBRA.  

Reminder: Only Covered Individuals Experience a COBRA Qualifying Event 

An individual must be covered under the group health plan—and experience a qualifying event while covered by the plan—to be eligible for COBRA coverage as a qualified beneficiary.  

Individuals who are not covered by the group health plan do not experience a COBRA qualifying event upon any of the triggering events.  Mere eligibility for the plan is not sufficient.  Individuals who are not actually covered by the plan will not receive a COBRA election notice upon any of the COBRA triggering events, and they will have no COBRA rights.  

• For more details: Which Plan Options Must Be Offered Under COBRA 

Reminder: Domestic Partners Are Not COBRA Qualified Beneficiaries 

Individuals must be a COBRA “qualified beneficiary” to have independent COBRA rights.  Domestic partners are not qualified beneficiaries.  

Qualified beneficiaries include the following individuals covered under the health plan as of the date of the qualifying event: 1) covered employee, 2), spouse (does not include domestic partner), 3) children, and 4) children born to (or placed for adoption with) the employee during the COBRA period.  

Some employers extend health plan eligibility to domestic partners choose to also extend “COBRA-like” continuation coverage rights to domestic partners upon approval of the insurance carrier or stop-loss provider.  Plans that provide COBRA-like coverage will treat domestic partners in the same manner as a spouse for continuation coverage purposes.  In other words, although the domestic partner is not a qualified beneficiary, the plan by its terms (with carrier/stop-loss approval) may extend to domestic partners the same continuation coverage rights that are available to spouses through COBRA. 

• For more details: COBRA for Domestic Partners 

Reminder: Voluntary Dropping of Health Coverage Not a Triggering Event 

Not all losses of coverage are a COBRA qualifying event.  Only the triggering events outlined above that cause a loss of coverage will create a COBRA qualifying event.  Any other cause of a loss of group health plan coverage will not give rise to the right to continue coverage through COBRA.  For example, an employee voluntarily dropping coverage for the employee and/or dependents at open enrollment or because of a mid-year permitted election change event is not a COBRA qualifying event.   

Relevant Cites:  

Treas. Reg. §54.4980B-4: 

Q-1. What is a qualifying event? 

A-1. (a) A qualifying event is an event that satisfies paragraphs (b), (c), and (d) of this Q&A-1. Paragraph (e) of this Q&A-1 further explains a reduction of hours of employment, paragraph (f) of this Q&A-1 describes the treatment of children born to or placed for adoption with a covered employee during a period of COBRA continuation coverage, and paragraph (g) of this Q&A-1 contains examples. See Q&A-1 through Q&A-3 of §54.4980B-10 for special rules in the case of leave taken under the Family and Medical Leave Act of 1993 (29 U.S.C. 2601-2619). 

(b) An event satisfies this paragraph (b) if the event is any of the following— 

(1) The death of a covered employee; 

(2) The termination (other than by reason of the employee's gross misconduct), or reduction of hours, of a covered employee's employment; 

(3) The divorce or legal separation of a covered employee from the employee's spouse; 

(4) A covered employee's becoming entitled to Medicare benefits under Title XVIII of the Social Security Act (42 U.S.C. 1395-1395ggg); 

(5) A dependent child's ceasing to be a dependent child of a covered employee under the generally applicable requirements of the plan; or 

(6) A proceeding in bankruptcy under Title 11 of the United States Code with respect to an employer from whose employment a covered employee retired at any time. 

(c) An event satisfies this paragraph (c) if, under the terms of the group health plan, the event causes the covered employee, or the spouse or a dependent child of the covered employee, to lose coverage under the plan. For this purpose, to lose coverage means to cease to be covered under the same terms and conditions as in effect immediately before the qualifying event.  

… 

Q-2. Are the facts surrounding a termination of employment (such as whether it was voluntary or involuntary) relevant in determining whether the termination of employment is a qualifying event? 

A-2. Apart from facts constituting gross misconduct, the facts surrounding the termination or reduction of hours are irrelevant in determining whether a qualifying event has occurred. Thus, it does not matter whether the employee voluntarily terminated or was discharged. For example, a strike or a lockout is a termination or reduction of hours that constitutes a qualifying event if the strike or lockout results in a loss of coverage as described in paragraph (c) of Q&A-1 of this section. Similarly, a layoff that results in such a loss of coverage is a qualifying event.  

Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship.  Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).