What Is COBRA?
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides continuation coverage requirements applicable to group health plans and the individuals that lose coverage under such plans.
Under COBRA rules, both group health plans and the individuals losing coverage under those plans have specific guidelines and strict timetables to follow in both offering and electing to receive COBRA coverage.
Administration of the COBRA rules is a four-step process that includes:
- Designing and deciding upon plan administration procedures (i.e., set loss of coverage dates at the end of the month instead of upon termination), processes (i.e., bill Qualified Beneficiaries monthly vs. giving a coupon book), and forms & notices (i.e., design and distribute our own vs. utilize a Third Party Administrator and its forms and notices)
- Identifying COBRA events (i.e., Qualifying Events, terminating events, etc.)
- Sending, receiving, and managing the paperwork, timeframes, and terminating events once someone is "on" COBRA
- Keeping updated on COBRA court cases and regulatory changes that may affect COBRA compliance procedures
What Are The Key Components Of COBRA Plan Administration?
COBRA (Consolidated Omnibus Budget Reconciliation Act) plan administration involves several key components to ensure compliance with the law and provide continuation coverage to eligible individuals. Here are the key components:
- The Notification Process:
Employers are required to provide initial notices to employees and their dependents about their rights under COBRA when they become eligible for group health coverage. This includes informing them of their rights to continue coverage if certain qualifying events occur. In addition to the initial notice, employers must provide various other notices throughout the COBRA coverage period, including notices about premium payment deadlines, changes to coverage options, and rights to extend coverage under certain circumstances.
- Eligibility Determination:
Employers must determine who is eligible for COBRA coverage based on the qualifying event and the individual's relationship to the covered employee (e.g., spouse, dependent child).
- Qualifying Events Determination:
Employers must determine which events qualify an individual for COBRA coverage. Qualifying events include termination of employment (other than for gross misconduct), reduction in hours worked, divorce or legal separation, death of the covered employee, and loss of dependent status.
- Election Process:
Once eligibility is determined, individuals have the right to elect COBRA coverage within a specified timeframe. Employers must provide the necessary forms and information to facilitate this election process.
- Premium Payments:
COBRA participants are required to pay the full cost of the premiums for their continued coverage, plus an additional administrative fee. Employers must establish processes for collecting these premium payments.
- Coverage Administration:
Employers or plan administrators must ensure that COBRA participants receive the same coverage options and benefits that were available to them before the qualifying event. This includes coordinating with insurance providers to maintain coverage.
- How To Determine Timelines And Calculate, Bill, And Collect Premiums:
There are many timelines for accepting coverage for both the employer and individuals who lose coverage, as well as multiple rules for the collection and termination of coverage due to payment times and amounts.
- Termination of Coverage:
COBRA coverage typically lasts for a specified period (e.g., 18 or 36 months, depending on the qualifying event). Employers must ensure that coverage is terminated promptly at the end of the COBRA period or if the participant fails to pay premiums.
- Recordkeeping:
Employers must maintain accurate records related to COBRA plan administration, including notices sent, elections made by participants, premium payments received, and termination of coverage dates.
By effectively managing these key components, employers can fulfill their obligations under COBRA and ensure that eligible individuals receive the continuation coverage to which they are entitled.
What Are The Most Common Errors Of COBRA Plan Administration?
- Late or Incomplete Notices And Notifications:
Failure to provide timely and complete COBRA notifications to qualified beneficiaries regarding their rights to continue health coverage after a qualifying event.
- Incorrect Eligibility Determinations:
Mistakes in determining who qualifies for COBRA coverage or for how long they are eligible. This can happen due to misunderstandings of qualifying events or errors in calculating the coverage period.
- Improper Premium Calculations:
Errors in calculating the COBRA premiums, including incorrect amounts, failure to offer the appropriate payment options, or not accounting for allowable premium increases.
- Non-Compliance With COBRA Regulations:
Violating COBRA regulations regarding notice requirements, coverage duration, premium payment deadlines, and other legal obligations.
- Inadequate Recordkeeping:
Poor record-keeping practices, such as failing to maintain accurate documentation of COBRA notices sent, premium payments received, and communications with beneficiaries.
- Inadequate Training of Personnel:
Insufficient training of staff responsible for COBRA administration, leading to errors in interpreting and applying COBRA rules and regulations.
- Compliance Oversight:
Employers should regularly review their COBRA plan administration processes - especially if it "outsources" COBRA administration to a TPA (Third Party Administrator) - to ensure compliance with applicable laws and regulations.
To mitigate these errors, employers and plan administrators should invest in robust COBRA administration training, maintain meticulous records, and regularly audit their COBRA processes to ensure compliance with applicable laws and regulations.
Specific Issues With COBRA Administration
COBRA administration involves a number of notice requirements and timelines, as well as a myriad of other COBRA rules. While anyone reading the COBRA rules can see that you have to identify QBs, send notices on a timely basis, etc., here are a couple of the specific issues that COBRA administrators must be aware of how to:
- Utilize the COBRA Timeline to your advantage
- How to offer COBRA during Open Enrollment
- Integrate COBRA with the FMLA and ADA
- Collect COBRA premiums
- Communicate rate changes
- Offer 'Alternative Coverage' in lieu of COBRA
- Properly deal with the question of COBRA v Medicare
- Apply Affirmative Rejections / Waivers
- Implement "Use Equals Election" Rules
- When you can terminate COBRA
Excerpts From Our COBRA Training & Certification Program
The following are three of many recommendations from our
COBRA Training & Certification Program that help address some of the concerns mentioned above:
Excerpt #1: Suggested Procedure For Handling Coverage During The Election & Payment Period:
- Pend a QB's coverage as of the loss of coverage date
- During the election and payment period, inform benefit providers who make inquiries that the QB is in a COBRA election and payment period and that coverage will be provided only if and when a proper election is made and payment received
- If a QB does not elect and pay for COBRA on a timely basis, all pended claims should be denied
- If a COBRA election is made and payment received, coverage should be retroactively reactivated for the period for which payment is timely received. Claims for this period then should be paid
- Review and coordinate these procedures with any insurer or stop loss carrier and all in house or third party administrative personnel
Absent such a review and coordination, an insurer might expect and attempt to require the employer to keep coverage in effect - and pay for that coverage - during the election and payment period, regardless of the action ultimately taken by the QB.
Excerpt #2: Administrative Recommendation:
Employers seeking to reduce COBRA liability and better control claims cost should include an affirmative rejection/waiver option on their QE Notices.
Excerpt #3: Termination Of COBRA For Failure To Pay Premiums:
Perhaps the most common reason for the termination of a Qualified Beneficiary's COBRA coverage prior to its natural expiration date is the failure by the QB (or any other person) to pay the premiums due for that coverage.
Put simply, a QB is not eligible for COBRA coverage for any period for which the applicable COBRA premium has not been paid.
Although employers' COBRA administrative systems should be set-up to terminate COBRA coverage automatically upon a failure to pay premiums on a timely basis, there are several special rules in this area that must be taken into account.
Recommended Training Courses
Benefit From Having A "Certified Administrator" Or "Certified TPA" Seal
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