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What is COBRA Continuation Coverage?

| Joan Morales

Under a Federal law known as the Consolidated Omnibus Budget Reconciliation Act of 1985, requires group health plans to provide a temporary continuation of GroupHealth, Dental, Vision Insurance and Health Care Flexible Spending to employees who would otherwise lose benefits due to retirement and certain other qualifying events.  Basically, an insurance safety net for a period of time which is based on the qualifying event. 

COBRAcontinuation coverage must be offered to each person who is a “qualified beneficiary.” Qualified beneficiaries are the employee, spouse, dependent child(ren), who are covered under the Plan on the day before the qualifying event.

The coverage is identical to the coverage provided under the benefits or plans for active employees and their dependents.  The catch is you have to pick up the entire tab, plus up to 2 percent for administrative costs. 

Several events can trigger COBRA qualification for an employee, a spouse, or a dependent. 

For example, a qualifying event for an employee would be a voluntary or involuntary retirement or termination of employment.  

Qualifying events for spouses and dependent children would be employee’s retirement, death, divorce or legal separation, employee’s entitlement to Medicare* or dependent child stops being eligible for coverage as a “dependent child.”

The law requires that you be given the opportunity to elect COBRA for 36 months if you lose coverage as a result of the covered employee’s death, divorce, legal separation, the covered employee’s enrollment in Medicare* or a dependent child losing eligibility as a dependent child.

If the qualifying event is one of the above, you must notify AA Benefits ServiceCenter within 60 days of the event.  BSC can be contacted by calling 1-888-860-6178 or from my.aa.com.

If the qualifying event is retirement or termination of employment, the law requires that you be given the opportunity to elect COBRA for 18 months.  You will automatically receive information from Alight Solutions the COBRA administrator about electing continuation of coverage.

SelectingCOBRA for a limited time period is a viable option to the pre-65 RetireeMedical Option. 

If you signed up for APA Supplemental Medical Plan, this Plan could be your primary retiree medical plan (effective January 1, 2018).  You may consider using a combination of COBRAand SMP benefits.

You should consider all the options you may have before you make your decision. 

*COBRAhas specific rules regarding “second qualifying events” that allow an extension of the duration under COBRA coverage from 18 to 36 months for spouses and dependents when certain criteria are satisfied. The IRS has published Notice 2004-22 which addresses this topic.  In the notice, the IRS concludes that because the former employee’s Medicare enrollment would not have caused a loss of coverage while the employee was active, it cannot be considered a second qualifying event.

Medicare entitlement of a covered employee is one of the listed events that can be a second qualifying event.  However, this ruling holds that Medicare entitlement is not a second qualifying event unless(ignoring the first qualifying event (retirement)) it would result in a loss of coverage under the group health plan.

Since the FAA mandatory retirement age law is not requiring the pilot to retire because they became eligible for Medicare, it would not meet the specific requirements of secondary qualifying events allowing up to 36 months of coverage under COBRA.

If you have any questions regarding your Retiree Benefit options for 2018, feel free to give Joannie Morales (ext. 6) or Markus Bras (ext. 3) a call at (888)679-9779.

Disclaimer:  This information is based on available JetNetand Benefit guide sources and is subject to change without notice.  This information should solely be used to complement the Retiree Medical Insurance information provided by American Airlines.  The information published on JetNet and/or contained in the Pilot’s Benefits Guide overrules guidance contained in this document. 

Connect with Joannie Morales, Manager of Pilot Services at jmorales@afadvisors.com

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