COBRA Election, the Birthday Rule, and a Son's Hospital Bills
Priya, 34, resigns on June 30 from a 240-employee employer with a fully insured group health plan; her coverage ends that day. The plan administrator mails her COBRA election notice on July 25. She elects COBRA on August 20 and pays the first premium on September 5. Her husband's employer plan, whose open enrollment has closed, permits special enrollment. Their son, age 8, is covered under both parents' plans; Priya's birthday is March 3 and her husband's is July 19. The son incurs $14,000 of covered expenses in August, before Priya's election, and another $9,000 in October. Priya asks whether electing COBRA was a mistake and who pays the August bills.
1. Was Priya's COBRA election timely, and what is the effective date of coverage?
Read the worked answer
Step 1 - Is the employer covered? Yes. COBRA applies to employers with 20 or more employees; 240 qualifies, and the plan is fully insured.
Step 2 - Qualifying event and maximum period. Termination of employment (including resignation) is a qualifying event giving up to 18 months of continuation.
Step 3 - Election deadline. The individual has 60 days from the later of the date coverage ends or the date the election notice is provided. Her notice was dated July 25, so the deadline ran to about September 23. Electing August 20 is timely.
Step 4 - Premium deadline. The first premium is due within 45 days after the election - roughly October 4. Paying September 5 is timely.
Step 5 - Effective date. COBRA coverage is retroactive to July 1, the day after coverage ended. There is no gap.
Side note: the plan administrator appears to have taken 25 days to issue the notice after the event. The 14-day rule and the 44-day outside limit were missed, which extends her deadlines but does not invalidate her timely election.
Answer: the election was proper, and the August expenses are covered even though they occurred before she elected.
2. For the August $14,000 claim and the October $9,000 claim, which plan is primary and how much does each pay?
Read the worked answer
Step 1 - Determine the COB rule. For a dependent child covered by both parents' plans, the standard rule is the birthday rule: the plan of the parent whose birthday (month and day) falls earlier in the calendar year is primary.
Step 2 - Apply it. Priya's birthday is March 3; her husband's is July 19. March comes first, so Priya's plan is primary - even though her coverage is now COBRA. COBRA continuation carries the same plan terms and the same COB status as active coverage.
Step 3 - August $14,000. Priya's COBRA plan processes the claim first under its deductibles, coinsurance, and network rules. Her husband's plan then acts as secondary and pays the remaining covered amount up to what it would have paid had it been primary. The providers are made whole; the family does not profit.
Step 4 - October $9,000. Same order, same result.
Step 5 - What if she drops COBRA? The husband's plan then becomes primary, but only if the son was actually enrolled. Enrollment depends on someone having requested special enrollment within 30 days of the June 30 loss of coverage - that is, by about July 30. If that window was missed, the son has no coverage in the husband's plan until open enrollment, and dropping COBRA would leave him uninsured.
Key trap: the birthday rule ignores which parent has custody and which plan is cheaper. Do not substitute a "custodial parent" rule unless the parents are divorced and a court order or the plan specifies it.
3. Was electing COBRA a mistake? Advise Priya on cost, deadlines, and risk.
Read the worked answer
Not a mistake, but it may be the expensive option.
What she bought: retroactive, gap-free coverage from July 1 for a month of August claims that would otherwise be uninsured. She also preserved the primary position for the son under the birthday rule.
What it costs: COBRA permits a charge of up to 102% of the full group premium - she now pays the employer's share too. Compare that to the husband's family coverage; if his plan is cheaper, switching is the rational move.
The leverage she actually has: the 60-day election period means she could have waited until late September and elected retroactively only if a claim materialized. That is a legitimate cash-flow strategy - but every month she waits must be paid retroactively if she elects.
Deadlines to calendar:
- Husband's special enrollment for the son: 30 days from June 30.
- COBRA premium: 45 days from election.
- Loss of COBRA later creates a fresh special enrollment right in the husband's plan - but using that right consumes the window.
Risks: 18-month maximum (29 months if a Social Security disability determination is made during the first 60 days); coverage terminates early if she becomes entitled to Medicare or fails to pay within the grace period; and a lapse in COBRA cannot be reinstated.