When an employee voluntarily drops dependents during open enrollment, do we have to offer the dependents COBRA continuation coverage? What is the anticipation of divorce rule?

There is no qualifying event that triggers offering COBRA when an employee makes a voluntary choice to drop dependents from the health insurance plan during open enrollment.

Generally, COBRA requires that an employee, spouse or dependent child be covered by the plan the day prior to the qualifying event. However, there is an exception in the regulation regarding spouses or dependent children who are dropped by an employee in anticipation of divorce or legal separation. This is referred to as the anticipation of divorce or legal separation rule. If an employee drops their spouse and/or dependent children in anticipation of divorce or legal separation, then the spouse and children must still be offered COBRA when the divorce or separation is finalized, even though they weren't covered the day prior to the divorce. Consequently, since they weren't covered the day prior to the divorce this would cause a lapse in coverage for the intervening period.

In practice, employers struggle with this issue, as it is difficult to know what the employee is anticipating when making an open enrollment change. It is the employer's responsibility to take reasonable measures to determine if the anticipation of divorce rule applies. Consider asking questions of the employee at the time of the open enrollment change, adding related questions to the coverage change forms or sending notice to the employee's spouse advising the spouse of his or her rights if a divorce or legal separation is pending. Due to the implications of this rule and the potential for unforeseen COBRA rights, as well as possible difficulty with insurance carrier compliance, employers are urged to consult with legal counsel for specific guidance on how their COBRA obligations can be met in this circumstance.

Further information can be found on the DOL website's Health Benefits Advisor page.