COBRA Election

Many people have heard of COBRA, but what is it? COBRA is a way for an individual to keep their health insurance coverage if they have experienced a job loss or another qualifying event. When opting for COBRA, it is important to realize that the reimbursement accounts you were participating in prior to COBRA enrollment may be affected. Below we’ve outlined a few ways that employee benefits may be affected when COBRA is elected.

 

Health Savings Accounts (HSA)

Health savings accounts stay with the account owner no matter if or how they qualify for COBRA. Participants will continue to be eligible and be able contribute to an HSA while on COBRA as long as:

• They are enrolled in an HSA-eligible health plan (or a high-deductible health plan).
• They do not have any disqualifying coverage (such as a flexible spending account).

If the participant is not enrolled in an HSA health plan, they will not be able to contribute to the HSA account; however, participants are still able to spend the HSA funds on qualifying expenses such as COBRA premiums. HSA funds can also be used to pay group health insurance premiums if the individual is receiving unemployment funds under state or federal law.

 

Flexible Spending Accounts (FSA)

If enrolled in an FSA prior to COBRA coverage, participants may be able to still use their FSA funds. The ability to spend depends upon a few factors as well as the employer’s FSA account specifications. COBRA participants may be able to re-enroll but only through the end of the plan year.

Claims incurred after becoming COBRA eligible do not qualify for reimbursement unless the participant re-enrolls in an FSA through COBRA. If FSA coverage ends, there is a run-out period that allows claims to be submitted for reimbursement if they were incurred prior to the event that qualifies the participant for COBRA coverage.

 

Health Reimbursement Arrangement (HRA)

Normally, an employer must offer access to a participant’s HRA as part of COBRA coverage. If an employee opts for COBRA, the employer is required to offer the same coverage they had prior to the COBRA qualifying event. Depending upon the plan’s design, HRA funds may be used to pay for COBRA premiums.

 

Commuter Benefits

COBRA does not include commuter benefits. If an employee is terminated and becomes eligible for COBRA, they will no longer have access to commuter benefits.

 

 

The information in this blog post is for educational purposes only. It is not investment, legal or tax advice. For legal or tax advice, you should consult your own counsel. To stay up to date on benefits trends and insights, subscribe to our blog.