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Does ERISA Apply to COBRA Coverage?

Posted Thursday, April 4, 2019 by Pivotal Law Group

ERISA applies to most insurance obtained through an employer (https://pivotallawgroup.com/Blog/2018/01/What-is-ERISA-and-How-Does-It-A). “COBRA” coverage is insurance coverage you get after your employment ends. So it’s understandable if you assume that COBRA coverage isn’t ERISA-governed.

Surprisingly, many courts have held that ERISA governs COBRA coverage after all.

ERISA generally applies to any insurance procured by an employer for the purpose of providing insurance benefits for its employees. When an employee’s employment ends under the right circumstances, the employee is eligible to purchase COBRA coverage to replace the lost employer-sponsored coverage. Congress enacted COBRA (the “Consolidated Omnibus Budget Reconciliation Act”) in 1986 to make sure people changing jobs don’t have a gap in their insurance coverage. COBRA requires that certain employer-sponsored insurance benefits plan allow employees changing jobs to continue coverage under the right circumstances. COBRA coverage must generally be identical to the coverage the former employer provides. And if the employer modifies coverage, the modifications must generally apply to the former employee’s COBRA coverage.

Thus, even though COBRA coverage would appear to be distinct from the employer’s ERISA plan, a former employee with COBRA coverage is effectively continuing to participate in their former employer’s ERISA plan by paying the premiums themselves.

For that reason, courts typically treat COBRA coverage as ERISA-governed - a result that might be counterintuitive for many employees.

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