“All or nothing” is not always the case when it comes to offering COBRA coverage. Frequently, the question arises on whether COBRA coverage should be an all-or-nothing proposition. In other words, should it be
bundled or unbundled, combined or offered on a stand-alone basis?

Note that in its earlier proposed COBRA rules, dating back to 1987, the IRS established criteria for unbundling coverage, including the use of the terms “core” and “non-core,” but the criteria were eliminated
in its final rules. Instead, plan documents determine whether benefits are provided under a single or multiple group health plan. For example, if an employer sponsors a major medical plan as well as dental and vision coverage and all are maintained under separate plan documents, the coverages must be offered as an unbundled plan. In other words, an employer should offer all three benefits separately on a stand-alone basis.

The central analysis is whether coverage is “core” or “non-core.” Typically, the major medical plan is the core coverage. Most plans require medical coverage in order to receive prescription coverage.  Therefore, the employer is allowed to offer the prescription bundled with the medical plan. If, however, the major medical plan is not a requirement to obtain prescription coverage, prescription coverage would be offered as an unbundled plan.

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