Question: When an employee terminates a domestic partnership, does the domestic partner losing health coverage have COBRA rights?
Compliance Team Response:
Domestic Partners Are Not COBRA Qualified Beneficiaries
Individuals must be a COBRA “qualified beneficiary” to have independent COBRA rights. Domestic partners are not qualified beneficiaries.
Qualified beneficiaries include the following individuals covered under the health plan as of the date of the qualifying event:
- Covered Employee
- Spouse of the Covered Employee (Does Not Include Domestic Partners)
- Child(ren) of the Covered Employee
- Child(ren) Born to (or Placed for Adoption with) the Covered Employee During Period of COBRA Coverage
General Rule: Domestic Partners Have No COBRA Rights Upon Termination of Domestic Partnership
The general rule is that domestic partners have no COBRA rights upon termination of the domestic partnership because the domestic partner is not a COBRA qualified beneficiary.
General Rule: Domestic Partners Can Access COBRA Only as Covered Employee’s Dependent
The only situation where a domestic partner would be able to continue coverage through COBRA would be where the employee is on COBRA and chooses to cover the domestic partner as a dependent.
For example, take an employee who terminates from employment (and thereby loses active coverage) when covering himself and his domestic partner under the health plan. In this situation, the employee can elect COBRA for himself and the domestic partner as his covered dependent. Even though domestic partners are not qualified beneficiaries, the employee has the right to cover his domestic partner as a dependent through COBRA because the plan provides that domestic partners are eligible dependents for active employees.
However, if the employee dies or chooses to drop COBRA coverage, the domestic partner has no right to continue COBRA coverage independently. Only qualified beneficiaries have that independent COBRA election right.
In a situation where an employee terminates a domestic partnership, the employee will not have experienced COBRA qualifying event (i.e., the employee remains eligible for and enrolled in active coverage). Therefore, the employee will not be receiving COBRA. This means that there will be no COBRA coverage available to the former domestic partner.
Exception: Plan May Offer “COBRA-Like” Coverage to Domestic Partners
Many plans that extend eligibility to domestic partners choose to also extend “COBRA-like” continuation coverage rights to domestic partners.
Plans that provide COBRA-like coverage will treat domestic partners in the same manner as a spouse for continuation coverage purposes. In other words, although the domestic partner is not a qualified beneficiary, the plan by its terms may extend to domestic partners the same continuation coverage rights that are available to spouses through COBRA.
In these situations, the COBRA-like coverage provides independent continuation coverage rights (identical to those available to spouses) to domestic partners.
Plans that offer COBRA-like coverage to domestic partners will therefore offer the same continuation rights upon termination of a domestic partnership as made available to spouses upon divorce or legal separation. This means that the domestic partner would have the right to continue coverage for a maximum coverage period of 36 months upon the termination of domestic partnership.
Important Note: Insurance Carrier (or Stop-Loss Provider) Must Agree to COBRA-Like Coverage
Many insurance contracts (and stop-loss provider agreements) provide that the carrier will extend continuation coverage only to those individuals who are eligible to receive COBRA. In these situations, the employer cannot provide COBRA-like coverage to domestic partners without risking that the carrier will refuse to cover the domestic partner’s claims. That could result in the employer being required to self-fund the domestic partner’s claims—which is the worst-case scenario for an employer.
Therefore, it is crucial that the employer confirm the coverage with the insurance carrier (or stop-loss provider) prior to extending COBRA-like coverage to domestic partners. The mere fact that the plan provides employees’ domestic partners are eligible dependents—even if there is a company-defined domestic partner eligibility category—does not necessarily mean that the plan also extends COBRA-like continuation coverage to such domestic partners.
More Information on Domestic Partner Health Coverage
- ABD Office Hours Webinar: Health Benefits for Domestic Partners
- ABD Compliance FAST: Tax Consequences of Domestic Partner Health Coverage
- ABD Compliance FAST: Mid-Year Enrollment of a Domestic Partner
Treas. Reg. §54.4980B-3, Q/A-1(a)(1):
Q-. 1. Who is a qualified beneficiary?
A-1. (a)(1) Except as set forth in paragraphs (c) through (f) of this Q&A-1, a qualified beneficiary is—
(i) Any individual who, on the day before a qualifying event, is covered under a group health plan by virtue of being on that day either a covered employee, the spouse of a covered employee, or a dependent child of the covered employee; or
(ii) Any child who is born to or placed for adoption with a covered employee during a period of COBRA continuation coverage.
Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).