Is losing my COBRA subsidy a "qualify event" to join another insurance plan?
October 27, 2010 7:42 PM   Subscribe

Is the impending expiration of my COBRA federal subsidy a "qualifying event" that will allow me to join my husband's insurance outside of open enrollment? (even though I'll still be eligible for unsubsidized COBRA)

I'm trying to decide if I should join my husband's health insurance this November (during his open enrollment), or remain on my own COBRA insurance. My husband's employer pays 50% of insurance premiums for enrolled family members. The COBRA subsidy, on the other hand, reduces my premium by 65% and lasts 15 months. I started subsidized COBRA coverage in May 2010, so it will expire at the end of July 2011 (it's a 15-month subsidy). At that time, I will still be eligible for three months of unsubsidized COBRA coverage (COBRA coverage lasts 18 months), but it will just be really friggin expensive. Therefore, I'm wondering if losing the subsidy counts as a qualifying reason to join my husband's plan at that time.

He asked both his employer and the new health insurance reps, and they were stumped. They're looking into it more, I guess, but I'm wondering if anyone else can speak with some level of authority.

Financially, it would be better for us (like, $140 a month better) for me just to stay on COBRA and jump onto his plan next summer when the subsidy expires. But if that's going to be an issue, or if there is a risk that I'll have to pay the full COBRA premium (or be uninsured until 2011 open enrollment), I should probably join his plan tomorrow.

Thanks for your input!
posted by lilgoyl to Work & Money (12 answers total)
I'm just a person on the internet, so take this with a grain of salt, but no, that isn't a qualifying event. Birth/adoption and marriage are basically always qualifying events and sometimes, a spouse losing his/her employment will be one as well. But I've never heard of losing your COBRA subsidy acting as a qualifying event.

if there is a risk that I'll have to pay the full COBRA premium (or be uninsured until 2011 open enrollment), I should probably join his plan tomorrow

Keep in mind that being uninsured from the COBRA subsidy ending to the next open enrollment might cause problems. I know healthcare reform is eliminating the idea of a pre-existing condition, but has that happened yet? And there's always the very real chance that you might be struck by illness or injury during the uninsured time.
posted by kate blank at 8:13 PM on October 27, 2010

Have your husband ask his HR generalist or benefits person, just to be sure. I know that marriage is a qualifying event, and I thought that a spouse losing health coverage (by losing a job, for example) also counted, but I'm not sure if that's the case, as I'm just also just a person on the internet. Someone at your husband's work should be able to give you a specific answer.
posted by lexicakes at 8:33 PM on October 27, 2010

Read over your COBRA paperwork again. Typically, once you become eligible for other group coverage, you are no longer eligible for the subsidy. If you're eligible to join your husband's plan, you may be losing eligibility for the subsidy, anyways.

Now, of course, you're the one claiming that you're still eligible for the subsidy. There's no one looking over your shoulder (yet) to make sure that you still are. If you are audited by the IRS, however, they may ask you to verify eligibility. If you cannot, you will owe taxes and possibly penalties for claiming the subsidy when you weren't eligible for it. Relatively few people are audited by the IRS, so it's up to you whether you want to take the risk or not.
posted by pecanpies at 4:16 AM on October 28, 2010

When I was the benefits person at my last company, the loss of existing coverage most certainly was a "Qualifying Event." It happened all the time when a spouse would lose their job and then want to come onto our plan. I've never dealt with COBRA expiring specifically (our coverage was 100% for all so no one would choose to go on COBRA instead of getting the free coverage we provided) but to me that is the same thing.

Your insurance booklet (ask HR for a copy if you no longer have the one provided to your husband upon hiring) should have a very specific list of qualifying events. I have a feeling that by "insurance reps" you mean the broker who sold your company the plan and not the actual insurance company. My feeling is that if you called the 800# for the actual insurance company they could answer that question in a matter of seconds.
posted by magnetsphere at 8:20 AM on October 28, 2010

Response by poster: It's important to remember that I'm referring to loss of the federal subsidy, NOT the loss of COBRA coverage itself. I'll still be eligible for 3-months of expensive COBRA after the subsidy expires.

And by "reps", I mean: husband's employer's two HR reps, two reps from the insurance broker, and two reps from the actual insurance company. He ran this unique question by each and every one of them and no one could give him an answer. The insurance company is looking into it, but they acted as if they just didn't know the answer.

Whatever answer they give him, we'll be sure to get it in writing so we don't run into problems next summer.

I've looked through my husband's entire welcome packet and do not see a list of qualifying events.
posted by lilgoyl at 9:11 AM on October 28, 2010

What you're looking for (or referring to) is HIPAA Special Enrollment. As in, when one can enroll on a plan outside of a given period such as open enrollment.

I do know that termination of COBRA for failure to pay or for cause are not a qualifying loss of coverage.

In a sense - COBRA was modified to grant subsidies for certain individuals. In order for someone to qualify as a special enrollee following termination of that subsidy, HIPAA would have had to change as well.

I don't think there were any HIPAA changes related to the COBRA subsidy. In other words, no - you can't enroll outside of open enrollment just because your subsidy terminates.
posted by thatguyjeff at 10:14 AM on October 28, 2010

Response by poster: I looked into it more, and legally, I guess I will not be eligible for the COBRA subsidy any more once I am eligible to join another health plan (i.e. husband's open enrollment). The subsidy was intended to last the shorter or 15-months or whenever I am eligible to join another health plan (regardless of its cost).

Assuming I'm reading this right (see Period of Coverage) and am going to stay within the law here, my best financial option at this point appears to be joining my husband's plan during open enrollment.
posted by lilgoyl at 11:11 AM on October 28, 2010

Response by poster: Not that I intend to try to "screw" Uncle Sam here (at this point, I will be joining my husband's plan), but I'm just can they actually determine if I'm eligible to join another plan??
posted by lilgoyl at 11:13 AM on October 28, 2010

how can they actually determine if I'm eligible to join another plan

They can't. That's what I mean when I say there's no one looking over your shoulder. You have a legal obligation to notify your COBRA administrator that you are no longer subsidy-eligible. If you continue to claim the subsidy but are no longer eligible, you technically are committing fraud, but you likely won't be caught unless you're audited by the IRS.

IANAL, IANA(tax)L, etc.
posted by pecanpies at 2:31 PM on October 28, 2010

Response by poster: My husband just added me to his plan - he did get a call from the insurance company and they confirmed that the subsidy expiration is not a qualifying event (unless it coincided with my COBRA expiration, which it does not). Of course, considering the source, they certainly want me on his plan and NOT on COBRA, as it means higher premiums from our family :)

@pecanpies .... "If you are audited by the IRS, however, they may ask you to verify [subsidy] eligibility."

If I were audited by the IRS and I had remained on COBRA even though I was eligible for other coverage, how would they catch that? I can very easily prove that I was laid off last spring (which is one of the eligibility criteria for the subsidy), but how do you PROVE that you weren't eligible for other coverage? I mean, in reality, they would need verification letters from my husband's employer, my parents' employers, etc. all stating that "No, lilgoyl could not have joined our health plan at that time"... right? Would/could they really require letters like that?

I'm asking this because I'm not sure if I was or wasn't eligible to join my husband's health plan last spring when I got laid off (we never even looked into it as my employer offered me COBRA continuation and I jumped on it because I was pregnant at the time and didn't want to take any risks of being uninsured - plus, switching plans would have reset my nearly satisfied $2,000 deductible). Now I'm worried that, if I was eligible to join his insurance, it could come around to bite me in the ass if I'm ever audited.

aye aye aye ... insurance makes my head spin.
posted by lilgoyl at 3:22 PM on October 28, 2010

I honestly don't know. The subsidy is so new (relatively speaking), I don't have any past cases to go on. Your COBRA paperwork may have details about what penalties/taxes you may owe if you claim the subsidy when you're not subsidy-eligible.

It does sound as though you were probably never subsidy-eligible, though. Typically, a spouse losing employment is a qualifying event/change in status, and you were probably eligible to join your husband's plan when you got laid off (BIG caveat: I'm making some assumptions here, so please don't just take my word for it - I couldn't say for sure whether or not you were eligible without seeing your husband's plan document). I wouldn't lose too much sleep over it; you probably won't be audited by the IRS. I'm guessing there's a DOL hotline you can call if you have questions about the subsidy. If you're concerned, I'd do some searching on the internet or call your COBRA administrator for more details on what could happen if you claimed the subsidy when you shouldn't have. You can keep your questions vague, but regardless of what you say, I highly doubt they're going to report anyone to the IRS. They really don't care who is & isn't eligible as long as they're paid.
posted by pecanpies at 8:30 PM on October 28, 2010

FYI, though - if a person collects the subsidy for longer than he/she is eligible, the penalty is 110% of the amount of the subsidy. So, if someone was eligible for the subsidy from Jan-March, lost eligibility March 31, but continued to claim the subsidy from March-October, they'd owe 110% of the subsidy amount from March-October.

Here's some info from the IRS on ARRA.

And here's a link from the DOL.
posted by pecanpies at 8:42 PM on October 28, 2010

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