COBRA EMPLOYER FAQ
Employers
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is federal legislation that passed in 1985 and requires certain employers to provide employees the opportunity to continue their insurance coverage in the event they experience specific qualifying events that cause a loss of coverage.
Private employers with 20 or more employees that offer employer sponsored insurance coverage must offer COBRA. Employers must include all employees, whether full-time, part-time, seasonal or working in foreign countries when determining if they have 20 or more employees. In other words, employers can’t only count those that have insurance coverage; they must count all employees regardless of coverage.
There are two basic notices, the
General Notice
and the
Qualifying Event Notice.
The General Notice must be provided to all employees (and their dependents if any) within 90 days of the employee enrolling in an employer-sponsored plan; this notice outlines their future rights and obligations should they lose coverage due to a qualifying event.
A Qualifying Event Notice must be issued to any employee (and their dependents if any) who has had a qualifying event. Ultimately, a Termination Notice must also be issued to anyone experiencing a qualifying event.
The General Notice must be provided to all employees (and their dependents if any) within 90 days of the employee enrolling in an employer-sponsored plan; this notice outlines their future rights and obligations should they lose coverage due to a qualifying event.
A Qualifying Event Notice must be issued to any employee (and their dependents if any) who has had a qualifying event. Ultimately, a Termination Notice must also be issued to anyone experiencing a qualifying event.
There are two categories. The first category includes events that trigger a loss of coverage for the employee. These events allow for continued coverage of up to 18 months and are as follows:
- Termination of employment
- Reduction in hours (which causes the employee to lose coverage)
- Death of employee
- Divorce or legal separation
- A dependent ceasing to meet the dependent definition
- The employee becoming entitled to Medicare benefits
Once an event occurs, both employees and/or their dependents must be provided a Qualifying Event Notice to the last known address. The notice must contain over 15 required items including information about premiums, due dates, how long coverage may last, when coverage may be terminated, etc. We utilize a Department of Labor (DOL) approved and issued Safe Harbor notice which contains the specific language.
Generally, if the plan provides any type of health benefit and is sponsored by the employer, it will be subject to COBRA. Medical, dental, vision, Employee Assistance Plans (EAP), Flexible Spending Accounts (FSA) and Healthcare Reimbursement Arrangements (HRA) all meet the definition. Disability, life insurance and legal assistance plans typically do not provide health benefits and are not subject to COBRA.
No, there is no requirement for an employer contribution to COBRA coverage. The entire amount of the insurance premium, plus a 2% administrative fee, may be charged to the qualified beneficiary.
Qualified beneficiaries are provided 60 days (from the later of the date of the Qualifying Event Notice or the loss of coverage date) to decide if they want COBRA coverage. If an election form is not received within the 60 day election period, the employer may terminate COBRA and all future obligations.
Qualified beneficiaries that elect coverage within the 60 day election period are not required to remit payment for an additional 45 days (from the date the enrollment form is signed). If the initial premium payment is not received within the 45 day period, the employer may terminate coverage.
Upon receipt of a completed enrollment form and the initial premium, a qualified beneficiary is considered enrolled and must be provided a 30 day grace period each month for monthly premium payments. In the event the monthly premium is not received within the 30 day grace period, the employer may also terminate coverage.
Finally, employers may terminate coverage at the end of the 18 or 36 month COBRA period. They may also terminate COBRA coverage if they terminate coverage for all active employees (i.e. drop the insurance plan for active employees) provided there is no continued coverage available through any parent or subsidiary company.
Qualified beneficiaries that elect coverage within the 60 day election period are not required to remit payment for an additional 45 days (from the date the enrollment form is signed). If the initial premium payment is not received within the 45 day period, the employer may terminate coverage.
Upon receipt of a completed enrollment form and the initial premium, a qualified beneficiary is considered enrolled and must be provided a 30 day grace period each month for monthly premium payments. In the event the monthly premium is not received within the 30 day grace period, the employer may also terminate coverage.
Finally, employers may terminate coverage at the end of the 18 or 36 month COBRA period. They may also terminate COBRA coverage if they terminate coverage for all active employees (i.e. drop the insurance plan for active employees) provided there is no continued coverage available through any parent or subsidiary company.
Yes, and they can be significant. The IRS can fine an employer up to $100 per day for non-compliance of COBRA regulations. The Department of Labor can also penalize an employer up to $110 per day per beneficiary for non-compliance. In addition, employers can be sued and held responsible for legal fees and medical claims.
While the DOL provides some guidance and model COBRA notices, continually sending out the different required notices, tracking multiple premium payments and timelines as well as keeping up on the changing COBRA regulations is not only time-consuming but sometimes confusing. Plus, dealing with disgruntled or upset employees can be a less than pleasant task for you. Rather, outsourcing COBRA administration means your staff can maximize their time running your business. You can rest assured that your company will remain in compliance and you will have a reliable source for COBRA related questions as they arise.
Interested? Request a Quote from Planned Benefit Systems, Inc. We want to be your COBRA administrator!
Interested? Request a Quote from Planned Benefit Systems, Inc. We want to be your COBRA administrator!
