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?
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.
COBRA Required Notices
- 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 & Cobra Updates
COVID-19 FAQs for Participants and Beneficiaries – U.S. Department of Labor
Employee Benefits Security Administration April 28, 2020
The Department of Labor (Department) is issuing these Frequently Asked Questions (FAQs) to help employee benefit plan participants and beneficiaries, as well as plan sponsors, and employers, impacted by the COVID-19 outbreak understand their rights and responsibilities under Title I of the Employee Retirement Income Security Act of 1974 (ERISA). In addition to providing this general guidance, the Department has issued the following other COVID-19 notices:
- Department of Labor, Internal Revenue Service (IRS) and Treasury Department Joint Notice (Joint Notice). The Joint Notice extends certain time frames affecting a participant’s right to healthcare coverage, portability, and continuation of group health plan coverage under COBRA after employment ends. The Joint Notice also extends the time for plan participants to file or perfect benefit claims or appeals of denied claims. The Joint Notice is available at https://www.federalregister.gov/documents/2020/05/04/2020-09399/extension- of-certain-timeframes-for-employee-benefit-plans-participants-and-beneficiaries-affected.
- EBSA Disaster Relief Notice 2020-01. The Disaster Relief Notice extends the time for plan officials to furnish benefit statements, annual funding notices, and other notices and disclosures required by ERISA. EBSA Disaster Relief Notice 2020-01 is available at https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and- compliance/disaster-relief/ebsa-disaster-relief-notice-2020-01.
Health Benefit Questions
Q1: If my place of employment temporarily closes because of the COVID-19 outbreak, am I still covered by my employer’s group health plan?
As long as the employer exists, continues to sponsor a health plan, and employs you, and you continue to meet your employer’s eligibility requirements, you would generally remain covered under your existing health plan, even if the employer’s physical location closes. For information on coverage through a particular group health plan, review the plan’s Summary Plan Description (a document often referred to as an SPD or insurance booklet that describes your health coverage). Contact the plan administrator and request a copy if you don’t have one. The plan administrator may be able to send you one by email or direct you to a website where the SPD is posted. Note that many plans require employee contributions, and those contributions are likely still due, even if you are not being paid and those contributions are no longer being automatically deducted from your wages or salary. If so, you may need to make this payment yourself.
Q2: My employer’s place of business is temporarily closed because of the COVID-19 outbreak. I cannot contact my plan administrator, or the claims administrator. Who do I contact to file a claim for benefits, or to obtain replacement identification documents?
Many employers affected by the COVID-19 outbreak may provide special ways for employees to contact them during the outbreak. Your employer should be able to give you the name of the person to contact to obtain claim forms or other documents. If you cannot locate a contact person for your employer, you may contact one of our benefits advisors for help at www.askebsa.dol.gov or 1-866-444-3272.
Q3: I think I may be losing my health coverage as a result of the COVID-19 outbreak. What can I do to obtain other health coverage?
You may have options. Read the guidance provided in the Joint Notice, which may allow you more time to preserve your rights under the special enrollment and COBRA provisions described below.
- Special Enrollment in Another Group Health Plan – If other group health coverage is available (for example, if your spouse’s employer offers a group health plan for which you are eligible), you may consider requesting a special enrollment period to enroll in the other plan. A special enrollment period gives you (and your family) an opportunity to enroll in a plan for which you are otherwise eligible outside of the plan’s open enrollment period. To qualify, you must request enrollment, typically within 30 days of losing eligibility for other coverage. These deadlines are extended during the COVID-19 outbreak, as explained in Q4, below. See Joint Notice at https://www.federalregister.gov/documents/2020/05/04/2020- 09399/extension-of-certain-timeframes-for-employee-benefit-plans-participants-and- beneficiaries-affected. After you request a special enrollment period and enroll in a plan, coverage must be made effective no later than the first day of the month following your request for enrollment. This type of coverage might be less expensive than other options because the employer often pays a part of the
- COBRA Continuation Coverage – If you are losing coverage through an employer that continues to offer a group health plan, you may want to consider electing COBRA continuation coverage.1 COBRA generally applies to employers with 20 or more employees and allows you (and your family) to continue the same group health coverage at group rates.2 Your cost may be higher than what you were paying before if your employer is no longer paying a portion of your premium during the COBRA continuation coverage period. Your plan administrator should notify you about the availability of COBRA coverage. After getting this notice, you generally have 60 days to elect coverage and 45 days after electing coverage to
COVID-19 UPDATE: DOL and IRS Announce Disaster Relief Related to Employee Benefit Plans
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 benefit 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.
You may be able to get coverage that is more affordable than COBRA coverage through the Health Insurance Marketplace, which provides special enrollment periods for certain qualifying events, including loss of qualifying health coverage due to the death of a family member or when an employer stops contributing to a temporary continuation of your coverage (such as COBRA). For more information, visit https://www.healthcare.gov/coverage-outside-open- enrollment/special-enrollment-period/.
Q6: Can my employer terminate or reduce my health benefits at any time?
Employers offer health benefits on a voluntary basis. Federal law does not require employers to offer health coverage to their employees, nor does it generally prevent employers from cutting or
reducing benefits. However, employers may have to take certain steps (such as providing advance notice) before reducing health benefits.3 If an employer terminates your health benefits, depending on the reason for termination, you and your family may have a right to continuation coverage under COBRA, if the plan still exists or a related employer still has a plan. You may also have a contractual right to coverage if, for example, benefits are required under a collective bargaining agreement. In addition, a plan cannot deny eligibility or continued eligibility based on an individual’s health status.
Depending on your coverage, the law may restrict the plan or health insurer from making mid- year changes. In response to the COVID-19 outbreak, plans otherwise restricted from making mid-year changes may add telehealth and other remote health services, in addition to services related to diagnosis and treatment of COVID-19, mid-year and without providing 60 days’ advance notice as required under federal law. Such plans may not limit or eliminate other benefits or increase cost-sharing, to offset the costs of those services and must provide notice of the changes as soon as reasonably practicable. See Families First Coronavirus Response Act FAQs Part 42, Q9 and Q13 at https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our- activities/resource-center/faqs/aca-part-42.pdf (setting forth non-enforcement policies for certain expansions in coverage in response to the COVID-19 outbreak).
For information on the Affordable Care Act and how it relates to employers offering health coverage, visit https://www.cms.gov/CCIIO/Programs-and-Initiatives/Employer-Initiatives/Employer- Initiatives.
Q7: I am a retiree and I receive retiree health benefits from my former employer. The company was affected by the COVID-19 outbreak. Can my retiree health benefits be terminated or changed?
Employees and retirees should know that private sector employers are not required by law to promise retiree health benefits. When employers do offer retiree health benefits, nothing in federal law prevents them from cutting or eliminating those benefits unless they have made a specific legally binding promise to maintain the benefits. The key to understanding your retiree health benefits lies in the documents governing your plan. If you have not already done so, you should obtain a copy of the Summary Plan Description (SPD) to determine the nature of the employer’s promise to you. If you do lose your retiree benefits, you may qualify for a special enrollment period to enroll in other coverage, discussed more above.
Q8: My employer did not pay the insurance premium for my group coverage. May I pay the premium to continue my coverage?
You should contact your employer to determine whether the employer intends to pay the premium. You may also wish to contact your state insurance commissioner regarding any rights you may have under state law to pay premiums directly to the insurance company or convert your health coverage to an individual policy.
3 Individuals that experience a significant reduction in health benefits may also qualify for a special enrollment period to enroll in Marketplace coverage. See www.healthcare.gov for more information.
Q9: I had COBRA coverage before the COVID-19 outbreak. The location I was sending my COBRA premium to is closed. Where do I send my premium?
Contact your employer for the information needed to continue making your COBRA premium payments. If you can’t contact your employer, you may contact one of our benefits advisors at www.askebsa.dol.gov or 1-866-444-3272.
Q10: Why is focusing on health coverage right away important when I lose eligibility for my employer’s plan?
Don’t wait too long to make a health coverage decision. Several of your best choices are only available for a limited time. Generally, you must request special enrollment in your spouse’s employer’s plan within 30 days of losing eligibility for other health coverage, and you must elect COBRA continuation coverage within 60 days of receiving the COBRA election notice. Even though the Department has extended those timeframes in the Joint Notice, you should be aware of the limited time available to exercise your healthcare coverage options. Additionally, you must apply for special enrollment in an individual health plan within 60 days of losing employer sponsored coverage, and that timeframe has not been extended.
If you still have questions about your rights or need help getting benefits, you may contact one of our benefits advisors at www.askebsa.dol.gov or 1-866-444-3272.
Q11. I was laid off because of the COVID-19 outbreak and filed for unemployment benefits. I received $600 per week of Federal Pandemic Unemployment Compensation in addition to my normal unemployment compensation. Can I use this money to pay my COBRA or other healthcare premiums?
Yes. As part of the recent COVID-19 legislation, Congress provided for an additional $600 per week of unemployment compensation (Federal Pandemic Unemployment Compensation) for states that enter into an agreement with the federal government. Federal Pandemic Unemployment Compensation ends on July 31, 2020. While the law does not require you to use this additional money to pay your health care premiums, maintaining your health care coverage is one of the most important things you can do in a pandemic.