Companies with twenty or more full time employees must provide Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage. It’s important for employers to understand the ins and outs of COBRA administration, so that they can comply with federal and state regulations.
What is COBRA?
Signed into law in 1986, the COBRA act grants qualified workers and their families continued health care coverage in the event that health care coverage is lost. COBRA coverage lasts for limited periods — typically 18 months (although certain circumstances may allow for coverage for up to 36 months).
Who qualifies for COBRA Coverage?
COBRA coverage is granted to workers and their families if they have gone through a qualifying event. Qualifying events for COBRA coverage are:
- Death of the covered employee.
- Termination or reduction in hours.
- The covered worker becomes entitled to Medicare.
- Divorce or legal separation.
- Dependent child who has exceeded the age limit put forth by the plan summary (typically 26 and older).
What is COBRA Administration?
COBRA administration refers to the management of COBRA to meet an organizations obligation to provide group health plans for qualifying individuals.
Rights notices
To comply with COBRA legislation, employers must notify employees and their families about their COBRA rights. There are multiple notices employers must provide, each with their own timelines.
- Summary plan description (SPD): This document outlines the rights of plan participants and beneficiaries, as well as explaining how the plan operates. Under ERISA, employers are required to provide an SPD within 90 days after a participant begins coverage.
- Initial rights notice: Employers must provide a general description of the coverage provided. This notice includes the plan name, address, and phone number for employees and their dependents to contact for information about COBRA and the plan.
- Qualifying event notice: When a qualifying event occurs, employers may need to notify the plan. Employers must notify the plan if they’ve terminated an employee, reduced an employee’s hours, if an employee passed, or if an employee is now eligible for Medicare.
- Election notice: When the plan is notified of a qualifying event, it must provide qualified participants with an election notice within 14 days. Election notices detail employees’ rights to continuation coverage, as well as instruct participants on how to make an election.
- Unavailability of continuation coverage: When an employee is denied continuation coverage or extended coverage, plans must notify the denied individual within 14 days of the request.
- Early termination coverage notice: Continuation coverage may come to an end sooner than expected. Early discontinuation of coverage may occur if premiums aren’t paid in full, payments are late, or if the individual has enrolled in another group health plan.
Eligibility management
Software is used to manage COBRA because it streamlines compliance tasks, and provides employers with access to robust reporting.
Automated systems handle enrollment, premium calculations, notifications, and record keeping — reducing the risk of costly errors. Additionally, technology enables employers to efficiently track COBRA eligibility, enrollment periods, and coverage termination dates. With the help of technology, employers can ensure they’re in compliance with regulatory requirements.
Technology also automates workflows for tracking terminations, elections, 834 file transformation, mapping, and financial reporting. With connectivity to other systems of record, enrollment data and deductions are automatically sent to carriers and payroll, respectively, reducing duplicate data entry.
Who administers COBRA?
COBRA administration is managed in two ways: in-house or outsourced.
Outsourcing COBRA
Outsourcing COBRA administration is very beneficial for businesses. Firstly, outsourcing COBRA to experts who have deep knowledge of COBRA legislation prevents a business from non-compliance. Secondly, outsourcing COBRA streamlines the administration process, reducing the burden on HR teams. Streamlining COBRA administration enables HR to focus on strategic initiatives. Lastly, outsourcing COBRA prevents the employer keep the good vibes going. Employers can avoid correspondence with former employees, and tough conversations with current employees.
Managing COBRA in-house
While employers can administer COBRA in-house, its not considered best practice. COBRA adminstration requires deep knowledge of legislation — organizations expose themselves to non-compliance and hefty fees without the help of experts. Compliance obligations are the legal responsibility of the employer, regardless if COBRA administration is outsourced.
Work with us
With ebm, keeping compliant has never been simpler. From automating workflows, to tracking terminations, elections, 834 file transformation, and mapping, our software makes COBRA administration a breeze.
