Affordable Care Act 201: Properly Reporting COBRA Continuation Coverage Keeping up with the many rules and regulations of the ACA can be challenging for any employer. It can get particularly challenging to understand COBRA rights and how to properly report a continuation of coverage on Form 1095-C. We will discuss a few of the more confusing COBRA scenarios and how they should be coded on Form 1095-C.

It is important to keep in mind that only employers with self-insured plans are required to report COBRA coverage. The insurance carrier is responsible for reporting COBRA coverage for employers with fully-insured plans.

Common COBRA Scenarios

The two most common COBRA scenarios are as follows:

  • 1st Scenario: An employee terminates employment and is offered COBRA upon termination
  • 2nd Scenario: An employee is laid off or goes from full-time to part-time, resulting in a reduction in hours and is offered COBRA

The instructions for Form 1095-C clearly state that an employee who is offered COBRA due to termination must be reported differently than an active employee who receives a COBRA offer due to a reduction in hours.

COBRA Offered Upon Termination Coding *Self-Insured Plans Only*

Based on the IRS instructions, an employee who elects COBRA upon termination is never reported as an offer of coverage. So essentially, this scenario is coded the same way as a regular terminated employee and the COBRA coverage will not be reflected on Part II “Employee Offer of Coverage” section of Form 1095-C.

In this example, the employee was full-time January through July and was offered COBRA in August due to termination of employment. The 1095-C should be coded as follows starting the month after termination:

  • Line 14 – Always use code 1H (No Offer of Coverage).
  • Line 15 – Blank.
  • Line 16 – Code 2A (Employee not employed during the month) should be used.
  • Part III – Should indicate which months the employee & the employee’s dependents were covered, both under the employer’s health plan and COBRA. The employer should continue to report until COBRA coverage is terminated.

COBRA Offered Upon Termination Coding *Self-Insured Plans Only*

COBRA Offered Due to a Reduction in Hours *Self-Insured Plans Only*

An employee who remains employed, but is offered COBRA due to work hours being reduced, should always be reported as an offer of coverage. The rules for this scenario are the complete opposite of the rules for terminated employees. The instructions state that the codes remain the same as an active employee’s codes.

In this example, the employee lost eligibility due to a reduction in hours. So COBRA was offered to the employee and the employee’s spouse and dependents. They elected to enroll in COBRA starting in August. The 1095-C should be coded as follows starting the first month of COBRA coverage:

  • Line 14 – 1E should be used since COBRA was offered to the employee, spouse and dependents.
  • Line 15 – Enter the lowest COBRA cost for self-only coverage starting the month that COBRA is elected.
  • Line 16 – Code 2C can be used since the employee elected COBRA, which indicates the employee enrolled.
  • Part III “Covered Individuals” – This section should include all enrollees including the employee and dependents.

COBRA Offered Due to a Reduction in Hours *Self-Insured Plans Only*

In the example below, the employee was enrolled in a MEC plan with MV, but lost eligibility due to a reduction in hours. COBRA was offered to the employee, but not their dependents. The employee chose to enroll in COBRA starting on August on 1st. The 1095-C should be coded as follows starting the first month of COBRA coverage:

  • Line 14 –1B should be used starting in August since COBRA was ONLY offered to the employee.
  • Line 15 – Enter the lowest COBRA cost for self-only coverage starting the month that COBRA is elected.
  • Line 16 – Code 2C should be used since the employee elected COBRA, which indicates the employee enrolled.

Employee was enrolled in a MEC plan with MV, but lost eligibility due to a reduction in hours

In this example, the employee lost eligibility due to a reduction in hours and COBRA was offered to the employee, spouse and dependents. The employee chose to waive COBRA starting on August 1st. The 1095-C should be coded as follows starting the first month of the COBRA offering:

  • Line 14 –1E should be used since COBRA was offered to the employee, spouse and dependents, even if the employee chose to waive.
  • Line 15 – Enter the lowest COBRA cost for self-only coverage. This line should show an increase in cost starting in August.
  • Line 16 – Code 2B (Not a full-time employee) should be used since the employee waived COBRA, indicating the employee was no longer eligible for coverage.
  • Part III “Covered Individuals” – This section should include the employee.

Employee lost eligibility due to a reduction in hours and COBRA was offered to the employee, spouse and dependents