How does retroactive COBRA coverage work?

Question

I'm voluntarily leaving my job at the end of this month for a new position in a couple of weeks. At my new job, I have health care coverage effective my first day of work. My current coverage terminates on my last day of employment. This leaves a small gap in coverage.

One option is to continue my current health plan using COBRA for that small period of time. My employer's information on COBRA indicates that I will be notified by mail of my eligibility within 14 days of the qualifying event (i.e. job termination), and that I have up to 60 days to sign up for coverage. If I sign up, I will be covered retroactively to the day of the qualifying event.

It seems, then, that it makes sense to slow-roll the process; if my family has any pressing health care needs in that time period, I can then sign up for COBRA, and if not, then I will just pick up the new plan when I start my new job and save the relatively large COBRA premium. It seems that there could be gotchas with this approach, though. Am I missing anything obvious here? One concern that a friend brought up was that any existing health conditions that my family has could be treated as pre-existing conditions in the event that there was a gap in coverage. I've not had a chance to research that to verify.

Answer 1

First, you are correct about having the 60 days to enroll. Specifically, 60 days from the later of the date you are notified or the date you are to lose coverage:

If you become entitled to elect COBRA continuation coverage, you must be given an election period of at least 60 days (starting on the later of the date you are furnished the election notice or the date you would lose coverage) to choose whether or not to elect continuation coverage.

^{From http://www.dol.gov/ebsa/pdf/cobraemployee.pdf}

Second, here is some information about the laws for pre-existing condition exclusions:

• The condition must have been diagnosed/treated for/etc. within the 6 months before your enrollment in the new plan. (In other words, old things that come back up do not apply.)
• The exclusion may not be longer than 12 months (18 months for a late enrollee).
• Cannot be applied to pregnancy
• Must be reduced (from 12 months) by the duration of creditable coverage.

This is the part you are worried about. Creditable coverage is defined as prior coverage with no "significant break in coverage". That break is very clearly defined as 63 days with no coverage.

(More info on creditable coverage and breaks in coverage)

Luckily for you, you've had full creditable coverage, so as long as you have not been without coverage for 63 days, you will be perfectly fine retroactively signing up for COBRA should there be any issues in the few weeks you are between jobs.

If the gap between your coverage is less than 63 days, and there are no health needs during it, don't sign up for COBRA, and the gap will be completely inconsequential in the future once you're covered again.

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I went through exactly this process last year. I left a job on the 3rd of a month, and coverage ended on the 30th. I put off signing up for COBRA just like you are considering, because there's no sense paying those premiums (they are insanely high) if it wasn't needed. About 45 days later, I decided to take a new job that offered insurance the first day. My gap was about 51 days total, so there was no need to retroactively sign up for COBRA. Luckily the laws were very clear about this, so I had no need to worry.