Ensuring compliance with COBRA is a critical but often complex task for employers. COBRA administration involves sensitive timelines, important legal obligations, and ongoing communication with qualified participants.
With so much at stake, many organizations choose to outsource COBRA administration to a third-party provider. But not all COBRA administrators are created equal. This guide will help you understand what to look for and how to make the best choice for your organization.
Importance of COBRA administration
COBRA (the Consolidated Omnibus Budget Reconciliation Act) gives employees and their families the right to continue health benefits after certain qualifying events, like job loss, reduction in hours, or other life events.
Employers with 20 or more employees are legally required to offer COBRA coverage and handle the associated administrative responsibilities.
Failure to comply with COBRA requirements can lead to substantial penalties, lawsuits, and reputational damage. Accurate and timely administration isn’t just best practice — it’s a necessity.
Risks of non-compliance and penalties
Non-compliance with COBRA can trigger daily IRS penalties, Department of Labor (DOL) fines, and even civil lawsuits from former employees. Employers could be liable for:
- $100 per day per affected participant for failure to provide proper COBRA notices
- Payment of medical claims that would have otherwise been covered
- Legal fees and damages associated with lawsuits
The risks are significant, which is why many employers choose to outsource this function to professionals who specialize in COBRA administration.
Why many employers outsource COBRA administration
Outsourcing COBRA administration helps employers avoid costly errors, offload time-consuming tasks, and ensure compliance with federal and state regulations. A reliable third-party administrator (TPA) can provide the tools, expertise, and support necessary to manage COBRA efficiently and accurately.
What a COBRA administrator does
A COBRA administrator manages all aspects of COBRA continuation coverage, including:
Compliance with notice requirements
COBRA law mandates timely distribution of several key notices, including the General Notice and Election Notice. An administrator ensures these are generated and delivered according to DOL and IRS regulations.
Managing participant elections and premium collections
Administrators track participant elections, collect premiums, and monitor payment grace periods. This prevents lapses in coverage and reduces administrative burden on HR teams.
Financial reporting and remittances
A good COBRA administrator reconciles payments, provides financial reports, and remits premiums to carriers on time and in full.
Providing participant support and communication
Participants often have questions during the COBRA process. Administrators offer dedicated support to explain coverage options, deadlines, and payment procedures.
Key factors when choosing a COBRA administrator
When evaluating COBRA administrators, consider the following key factors:
Experience in COBRA administration
Look for a provider with a strong track record and proven expertise managing COBRA compliance for employers of similar size and industry.
Compliance expertise
Your administrator should stay up to date with COBRA regulations, HIPAA requirements, and any applicable state continuation laws.
Technology and system capabilities
Modern administrators offer secure online portals and automated workflows, along with mobile access that simplify the experience for both HR and participants.
Communication and customer support quality
Timely, accurate, and empathetic support for COBRA participants is essential. Assess the provider’s service model, including response times and support availability.
References and industry reputation
Ask for client references and look for administrators with positive reviews, strong client retention, and industry recognition.
Benefits of outsourcing COBRA administration
There are several advantages to working with a trusted COBRA administrator:
- Saves HR time and resources by eliminating manual processes
- Ensures compliance with regulatory requirements
- Streamlines participant experience through digital tools and self-service
- Provides reliable support for participants navigating coverage options
- Enhances security with encrypted systems and data protection protocols
Considerations for selecting the right COBRA administrator
As you compare vendors, make sure to evaluate:
- Costs and pricing structures: Understand the fee model and what’s included
- Level of service and customization: Determine if the provider can tailor services to your company’s needs
- Reporting and analytics capabilities: Look for detailed, easy-to-understand reporting tools
- Integration with existing systems: Choose an administrator that integrates smoothly with your HRIS, payroll, and benefits platforms
Conclusion
Choosing a COBRA administrator is a decision that affects compliance, participant satisfaction, and your bottom line. A trusted partner can help you navigate the complexities of COBRA with confidence, reduce your liability, and improve the participant experience.
As COBRA enforcement continues to be a focus for federal agencies, now is the time to evaluate providers based on these key criteria and find the right partner to support your COBRA administration needs.
