Tasha's Two Health Plans: COB, the HSA She Cannot Have, and COBRA

Coordination of benefits uses different rules for adults and for children.

Tasha's own claims:

• She is the active employee/subscriber on her employer's HDHP. Under the active-employee rule, her own plan is primary and her husband's PPO is secondary, regardless of which plan is richer.

Her son's claim:

• The child is covered by both parents' plans and both parents are employees. Apply the birthday rule: the plan of the parent whose birthday comes first in the calendar year is primary. Husband's birthday is February 11, Tasha's is September 4 - so the husband's PPO is primary for the son, and Tasha's HDHP is secondary. (The rule uses month and day, not year, and does not depend on custody.)
• Primary plan pays its allowed amount under its own rules. Secondary plan then considers the remainder, but pays only up to what it would have paid as primary - the two plans together never exceed 100% of the allowed charge. The HDHP's $3,000 deductible generally still applies to what the secondary is asked to pay.

Practical result: Tasha should not assume her HSA-qualified plan pays first for her son simply because she carries him. Confirm allowable amounts with both carriers and never let a provider bill only one plan.

She was never an eligible individual for any month in which she had this coverage.

Eligibility requires HDHP coverage and no disqualifying coverage. Two separate disqualifiers exist:

1. Her husband's traditional PPO. Because she is enrolled in it, she has non-HDHP medical coverage - even though her own plan is an HDHP. Dual coverage destroys HSA eligibility for the months it exists.
2. The husband's general-purpose health care FSA. A general FSA reimburses first-dollar medical expenses and is disqualifying coverage, even when the spouse's employer funds it. (A limited-purpose FSA covering dental and vision only would be fine.)

Second error: she contributed the family maximum while enrolled in self-only coverage. Even without the disqualifiers she would have been limited to the self-only amount.

The last-month rule cannot rescue her: it requires her to remain eligible for the entire testing period, and she loses the HDHP in March anyway.

Fix: the excess plus attributable earnings must be withdrawn before the tax filing deadline (including extensions) to avoid the 6% excise tax on excess contributions. If it is not removed, the 6% applies each year the excess stays in the account. She should also confirm no distributions were taken that were reimbursed by the PPO - those would be taxable too.

COBRA

• Applies because the employer has 60 employees (federal COBRA covers employers with 20+); a termination triggers 18 months of continuation.
• She may be charged up to 102% of the group rate - the full premium plus a 2% administration fee, with no employer contribution.
• She has 60 days to elect, and coverage is retroactive to the loss date if she elects in time. That retroactivity is a genuine benefit: she can wait, see what April costs, and elect only if needed - provided she elects within the 60 days and pays back premiums.
• Trap: continuing the HDHP does not make her HSA-eligible again while she is also covered by her husband's PPO or its general-purpose FSA.

Husband's PPO (special enrollment)

• Loss of other coverage is a HIPAA special enrollment event, letting her enroll outside open enrollment - generally within 30 days of the loss of coverage (60 days for Medicaid/CHIP).
• Likely cheaper than 102% of COBRA, and it consolidates the family under one primary plan for the son.
• Trap: miss the 30-day window and she has no coverage until the next open enrollment; COBRA's 60-day window is the safety net.

Recommendation: enroll in the husband's PPO within 30 days; keep the COBRA election open as a backstop only if the PPO effective date slips. If the employer had fewer than 20 employees, federal COBRA would not apply and Nebraska's state continuation statute would need to be checked for a shorter continuation period.