When an Employee Assistance Program is Subject to COBRA

May 30, 2019

COBRA and Employee Assistance Program (EAP) compliance can be frustrating and complex. Certain elements must be present for an EAP to be considered a COBRA-covered benefit. Plan sponsors should take care in determining which plans are subject to COBRA and comply accordingly.  

The critical issue is whether the EAP provides medical care. In general, COBRA applies to group health plans that provide medical care or healthcare. If the EAP provides employees (and spouses, if eligible under the EAP) coverage for licensed health providers that assist in diagnosing and prescribing treatment related to the individual’s health condition, then the plan is likely subject to COBRA.

If the EAP is staffed with trained counselors (whether internally or through an outside service provider) who actually provide the counseling, the EAP will most likely be considered a group health plan and will be subject to COBRA. This is true regardless of whether the employer pays the full EAP premium for active employees.         

In contrast, if the EAP is staffed with non-trained persons who simply provide referrals to employees in need of counseling or medical treatment, then the EAP may not be subject to COBRA

EAPs typically also provide other non-healthcare benefits (i.e., financial or legal counseling). Those non-medical benefits should be taken out when calculating the COBRA premium and coverage.

Employers must determine what other health benefits are offered at open enrollment to a qualified beneficiary whose only coverage at the time of the qualifying event was the EAP. If a qualified beneficiary wasn’t eligible for other group health plan coverage at the time of the qualifying event, presumably only the EAP need be offered at open enrollment. But if the employee was eligible for (but not enrolled in) other group health plan coverage at the time of the qualifying event, then they must be given the opportunity to elect such coverage at open enrollment.

Some employers avoid administrative complexity by arranging with EAP carriers to extend coverage for 36 months beyond the qualifying event occurrence. This way, there is no loss of coverage during the maximum COBRA continuation period and COBRA compliance is greatly simplified. Other employers limit EAP eligibility to employees who are eligible for the group health plan and wrap the EAP into the COBRA election for the group health plan.

Neither approach is ideal. In the first, the employer is providing continued EAP coverage to individuals who potentially have a tenuous relationship to the employer. In the second, the employer is depriving non-benefit eligible employees access to the EAP when this group may most benefit from access.

In summary, if the EAP is found to be providing medical care, it is treated as any other benefit subject to COBRA. EAPs typically cover all employees, so complying with COBRA means sending initial and election notices to a broad population. Coverage would need to be offered to those covered on the day before the qualifying event (including divorced spouses, if applicable) and coverage may be continued for the full applicable COBRA coverage period (i.e., 18, 29 or 36 months). The employer may charge up to 102% of the cost.