COBRA is a complex issue with strict compliance requirements. Outsourcing this function can help reduce your workload and risk of fines. However, each administrator offers a different level of support. Find out if you’ll be assigned a specialist for day-to-day management and how easily accessible they are.
Group health plans must provide initial notices describing COBRA rights to covered employees and their spouses. These notices must be provided within specific timelines defined in the plan’s Summary Plan Description (SPD).
What Is COBRA?
COBRA is a federal law that allows individuals who lose their jobs or get laid off to continue their group health insurance for a limited time. It can be expensive, but it usually costs less than individual healthcare options on the ACA marketplace.
The first step in signing up for COBRA is getting a notice from your employer or the group health plan administrator that describes your rights to continue coverage. It must be sent within 14 days of the qualifying event and include the name of the person who handles COBRA for your group plan, how to contact them and where to get more information.
If you choose to sign up for COBRA, your first premium payment is due within 45 days of the date of your election notice. Your coverage will generally last for a maximum of 18 months, depending on the specific type of qualifying event that caused you to lose your insurance.
Who Is Eligible for COBRA?
Individuals covered by an employer’s group health plan can continue that coverage through COBRA, which is named for a section of the Consolidated Omnibus Budget Reconciliation Act. Eligible individuals typically receive a notice from their employer or the health insurance carrier explaining COBRA.
Those who qualify for COBRA can choose to keep their old health insurance plan, but it will usually cost more because they will have to pay the full premium without the employer picking up part of the tab. They also will have to pay any applicable taxes.
Your COBRA administration for employers will aid those choosing COBRA to consider all their options and compare them carefully. For example, enrolling in an Affordable Care Act (ACA) plan through the marketplace might be cheaper after a job loss or reduced hours, especially for those who might qualify for ACA premium subsidies.
How Do I Enroll an Employee?
COBRA is an important legislation for employers offering their employees group health insurance. It allows people who leave the company to continue their former employer’s coverage for a short period. This is especially helpful for those with pre-existing conditions who may find it difficult to obtain new coverage. Before the Affordable Care Act (ACA) was passed, many people who left their jobs without another plan immediately lost access to their health benefits.
To qualify for COBRA, an individual must experience a qualifying event. This could include termination, divorce, or the death of a family member. After the qualifying event occurs, the employer will send out an election notice with details about how to sign up for the plan. The person who receives the information has 60 days to decide if they want to enroll in the program.
How Do I Make the Enrollment Process Easier?
The federal COBRA law allows employees and their families to continue group health insurance coverage for a limited period after they experience a qualifying event. This can be done through your company, a third-party administrator, or your own. Regardless of how you administer it, you are responsible for compliance with the law.
Getting laid off, fired, or reduced hours can be scary, but losing access to your employer-provided healthcare plan can be even more of a blow. Luckily, the Employee Income Security Act added COBRA to allow qualified employees to retain their previous coverage under certain circumstances.
Generally, qualified individuals have 60 days after a qualifying life event (like a job loss, divorce or death) to elect COBRA continuation coverage. However, these former employees must explore options outside COBRA, such as Affordable Care Act marketplace plans and Medicare Advantage.
What Happens if I Don’t Enroll an Employee?
While COBRA does not cover life insurance or disability benefits, it does provide an opportunity to continue coverage through the individual market if an employee decides to do so. This special open enrollment period begins 60 days before an employer-sponsored plan ends.
As an HR professional, you must notify eligible employees of their COBRA rights and the option to continue their health coverage. This is a federal requirement and carries heavy penalties for non-compliance.
The key to effective COBRA administration is timing. Former employees need a 60-day window to decide whether or not to continue their coverage and 45 additional days to pay their premiums. This is why it’s important to have the data for the employee’s COBRA eligibility in-house and be able to send out their election notice as soon as possible. Doing so starts their 60-day COBRA period as quickly as possible and saves you money on administration fees.
What Happens if I Don’t Make the Enrollment Process Easier?
Once an employee experiences a qualifying event that causes them to lose coverage, they are entitled to COBRA continuation coverage. This coverage costs the full health plan premium plus a 2% administrative fee. They have 60 days to decide whether they want this coverage.
Depending on the type of qualifying event (such as termination of employment, reduction of hours or becoming eligible for Medicare), COBRA coverage lasts up to 36 months. Individuals should consult their summary plan description, or SPD, to get specific details.
Suppose you are the employer who sponsors a group health plan. In that case, your legal obligation is to offer employees and their family members this option after they experience certain qualifying events. Complying with the law can be a complex task. Many employers save time and money by outsourcing their COBRA administration responsibilities to companies specializing in this area.
