What is Cobra Administration?
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires employers with over 20 employees to offer the option for continued benefit coverage should an employee lose coverage for such things as termination of employment, reduction in hours, divorce, turning age 26, etc. In addition, most states require continuation of coverage for group plans with less than 20 employees.
COBRA is a maze of rules, required notices and procedures that are critical in order to avoid a legal dispute, fines, and penalties. The consequences of non-compliance can be serious. HR Service, Inc. provides highly skilled people to do COBRA implementation and ongoing administration based on proven standards and best practices developed over 20 years of business.
How long do I have to decide if I want COBRA coverage?
You will have an election period of at least 60 days to decide whether to continue your health plan with COBRA or to seek coverage through the Health Insurance Marketplace, through a spouse’s employer or Medicaid.
What counts as a qualifying event for COBRA?
According to the U.S. Department of Labor, the following are qualifying events for covered employees:
- Termination of the employee’s employment for any reason other than gross misconduct
- Reduction in the number of hours of employment
The following are qualifying events for the spouse and dependent child of a covered employee:
- Termination of the covered employee’s employment for any reason other than gross misconduct
- Reduction in the hours worked by the covered employee
- Covered employee becomes entitled to Medicare
- Divorce or legal separation of the spouse from the covered employee
- Death of the covered employee
- Loss of dependent child status under the plan rules (plans that offer coverage to children on their parents’ plan must make the coverage available until the adult child reaches the age of 26).
How much does COBRA health insurance cost?
It costs the same as your previous monthly health plan, plus a 2 percent service charge.
However, because you will now be responsible for the premiums that were once subsidized by your employer, your parents’ employer, or your spouse’s employer, the monthly cost shouldered by the consumer are much more significant. On average, employers pay nearly 82 percent of the cost of their employees’ health insurance, and almost 70 percent of the total family premium, so this means COBRA insurance can be up to 82 percent costlier for a consumer than their previous monthly payment.
How long does COBRA coverage last?
COBRA Required Notices
By law, COBRA continuation coverage can extend from between 18 to 36 months, depending on the type of qualifying event. Individual plans may provide more extended periods of coverage.
- General (Initial) Notice to newly enrolled, active employees and, if applicable, spouses, with USPS proof of mailing.
- Initial Qualifying Event Notice and Election Form to qualified beneficiaries, with USPS proof of mailing.
- COBRA Extension Notices, due to second qualifying event and Social Security disability.
- Early Termination Letter, if COBRA coverage is terminated early for any reason
- Insufficient Premium Letter sent to COBRA participant whose underpayment is less than or equal to 10% of the total premium due, but no more than $50.00.
COBRA Courtesy Notices
Late Payment Reminder sent on or around the 20th of each month to any participant whose premium payment has not yet been received
Partial Payment Letter sent to COBRA participant whose underpayment does not fall within the “insufficient premium” guidelines above and will lose coverage at the end of the month unless payment for the balance owing is made timely
Maximum Continuation Notice – sent 6-8 weeks prior to the end of a participant’s maximum continuation period, as an alert, and again after COBRA exhausts.
Reporting and Monthly Accounting
Reports are provided after the close of the prior month. The customer has 24/7 access to interim activity reports and prior months’ audited reports in an online MyCOBRA account.
COVID-19 UPDATE: DOL and IRS Announce Disaster Relief Related to Employee Benefit Plans Q&A
The DOL and the IRS jointly have provided in a final rule that all group health plans, disability and other employee welfare benefit plans MUST disregard the period from March 1, 2020, until 60 days after the end of the declared National Emergency related to the COVID-19 outbreak or such other date as provided by the agencies in future guidance (referred to in the final rule as the “Outbreak Period”) for purposes of the following periods and dates:
The 30-day period (or 60-day period, if applicable) to request special enrollment; the 60-day election period for COBRA continuation coverage.
- The date for making COBRA premium payments
- The date for individuals to notify the plan of a qualifying event or determination of disability
- The date within which individuals may file a benefits claim under the plan’s claim procedures
- The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claim procedures
- The date within which claimants may file a request for an external review after receipt of an adverse benefit determination
- The date within which a claimant may file information to perfect a request for external review
- The date for providing a COBRA election notice
This means that during the Outbreak Period all these dates and time limits are extended for payments due or events occurring during the Outbreak Period. For example, an individual who experiences a qualifying event in April will have until 60 days after the end of the Outbreak Period within which to elect COBRA. Similarly, any COBRA premiums due during the Outbreak Period will not be considered delinquent if the COBRA premiums are paid within 30 days following the end of the Outbreak Period. This means that COBRA premium payments that are due for March, April and May, at the very least at this point, are not required to be paid until 30 days after the end of the Outbreak Period. This will prove to be especially difficult in the administration of COBRA continuation coverage.
In a separate notice (EBSA Disaster Relief Notice 2020-01),the Department of Labor and the Department of Treasury, in consultation with HHS, provided relief for various deadlines and requirements under ERISA and the Code. In accordance with this guidance, an employee benefit plan and the responsible plan fiduciary will not be in violation of ERISA for failure to timely furnish a notice, disclosure or document that must be otherwise furnished during the Outbreak Period if the plan and responsible fiduciary act in good faith and furnish the notice, disclosure or document as soon as administratively practical under the circumstances. Good faith acts include use of electronic alternative means of communicating with plan participants and beneficiaries who the plan fiduciary reasonably believes to have effective access to electronic means of communication including email, text messages and continuous access websites.
In addition, if an employee benefit plan fails to follow procedural requirements for plan loans or distributions, the Department will not treat it as a failure if (i) the failure is solely attributable to the COVID 19 outbreak, (ii) the plan administrator makes a good faith, diligent effort under the circumstances to comply with those requirements and (iii) the plan administrator makes a reasonable attempt to correct any procedural deficiencies as soon as administratively practical. Also, the Department announced that it will not take enforcement action with respect to a temporary delay in forwarding plan loan repayments or participant contributions to the plan so long as the employer and service providers act reasonably prudently and in the interest of employees to comply as soon as administratively practical under the circumstances. Finally, certain other relief provisions are provided with respect to CARES Act loans and distributions, blackout notices and ERISA fiduciary compliance.