Are employers allowed to terminate a participant's COBRA coverage before the normal duration of COBRA?

Editor's Note: In response to the COVID-19 pandemic, the U.S. Department of Labor (DOL) released a new final rule that temporarily extends the period in which eligible employees can elect COBRA health insurance coverage, and the deadline for them to begin making COBRA premium payments. See DOL Temporarily Extends COBRA Deadlines and Agencies Revise—and Complicate—COBRA Deadline Extensions.

Although minimum coverage periods are set by COBRA statute, employers are permitted to terminate a participant's coverage before the expiration of an applicable 18-, 29- or 36-month period upon the occurrence of the following specified events:

• Termination of all group health plans. COBRA coverage may be terminated if an employer ceases to maintain any group health plan, including any successor plans. However, if the employer continues to maintain at least one other health plan for similarly situated employees, the employer must allow the participant to continue his or her coverage under one of those health plans.
• Failure to pay premiums. When a participant fails to make a timely payment of any required COBRA premium, the employer may terminate COBRA coverage. Employers must provide participants with at least a 30-day grace period for payment of any late premiums.
• Coverage under another plan. Coverage may be terminated when a qualified participant becomes covered under any other group health plan.
• Loss of Social Security disability status. Participants who are granted the 11-month extension for disability and who are no longer determined to be disabled by the Social Security Administration may have their coverage terminated as of the month that begins more than 30 days after such determination has been made.
• Entitlement to Medicare. Continuation coverage may be terminated to a qualified participant who becomes entitled to (not just eligible for) Medicare benefits after electing COBRA coverage. Employers should note that a participant becomes eligible for Medicare at age 65 but becomes entitled to Medicare only after enrolling in the program.
• Conduct. When a qualified beneficiary engages in conduct (such as fraud) that would justify the plan coverage termination of a similarly situated participant or beneficiary not receiving continuation coverage, continuation coverage may be terminated.

Although COBRA permits early termination of coverage for these events, it is important to remember that it does not mandate termination. The employer's plan documents, policies and practices govern.

When a group health plan decides to terminate continuation coverage early, the plan must give the qualified beneficiary a notice of early termination. The notice must be given as soon as practicable after the decision is made, and it must describe the date coverage will terminate, the reason for termination, and any rights the qualified beneficiary may have under the plan or applicable law to elect alternative group or individual coverage, such as a right to convert to an individual policy.