How should we reconcile competing demands of insurance plan, COBRA? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

How should we reconcile competing demands of insurance plan, COBRA?

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Q. Our health maintenance organization contract calls for terminating coverage for anyone who moves outside the HMO service area. COBRA requires us to offer continuation coverage to qualified beneficiaries even if they move outside the HMO service area. How do I comply with these requirements?

A. It is common for regional HMOs to terminate coverage for an individual who moves outside the area served by the HMO. Nevertheless, COBRA benefits must still be offered.

Under COBRA, coverage must be offered even if the benefit ceases to be of value to the qualified beneficiary. The employer must offer the same coverage available to other workers who move outside the HMO service area.

Thus, qualified beneficiaries would have to be provided an opportunity to opt into an indemnity or other plan available to those who move out of the service area. If there is no other plan, the qualified beneficiary only has to be offered COBRA coverage under the HMO plan.

A qualified beneficiary might still elect COBRA coverage under the HMO to take advantage of emergency coverage that may be available through the plan. Furthermore, the qualified beneficiary might be planning on moving back into the service area within a short time period.

In sum, an HMO cannot refuse to provide COBRA coverage to a qualified beneficiary who moves outside the HMO service area, even if the plan states that coverage “terminates.”

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