10 Cobra mistakes to Avoid. Accurate Insurance Solutions Tampa, Fl.

TOP 10 COBRA MISTAKES

(AND HOW TO AVOID THEM)

Introduction to COBRA

Consolidated Omnibus Budget Reconciliation Act

COBRA continuation coverage = temporary

continuation of health coverage at group rates

Available to “Qualified Beneficiaries” upon

occurrence of “Qualifying Events”

COBRA Noncompliance

IRS excise taxes

ERISA - $110 statutory penalties

Lawsuits to compel coverage (and pay attorneys’

fees!)

Adverse selection

Inability to terminate coverage

#10 – Assuming COBRA Doesn’t

Apply to You

COBRA applies to group health plans for

employers with 20 or more employees

Small employer exemption

Rule is – 20 or more employees on more than

50% of typical business days in the previous

calendar year

Count full-time and part-time employees

Part-time employees = fraction


Apply to Your Plan

COBRA applies to group health plans maintained

by employers

Health plans subject to COBRA:

Medical, dental, vision and Rx plans

Drug and alcohol treatment program

Employee assistance plans that provide medical care

On-site health care

Health FSAs and HRAs

Self-funded medical reimbursement plans

Wellness programs that provide medical care


Apply to Your Plan

Health plans not subject to COBRA: Long-term care plans

AD&D plans

Group term life insurance plans

LTD & STD plans

Wellness programs or employee assistance programs that do not provide

medical care

Exercise or fitness centers

Onsite first-aid facilities

Cancelling plan doesn’t always cancel COBRA

responsibility If employer continues to provide any group health plan, obligation to

provide COBRA coverage continues

#8 – Not Knowing Your Qualifying

Events or Qualified Beneficiaries

Qualifying events trigger COBRA coverage for qualified beneficiaries (QBs)

Who is a QB? An individual covered by a group health plan on the day

before a qualifying event

Employee, employee’s spouse, employee’s dependent children

Sometimes includes retired employee and spouse and dependent children

Any child born to or placed for adoption with covered employee during COBRA coverage period

May include agents, independent contractors and directors

What is a Qualifying Event?

Elements of a qualifying event: Specified triggering event

Causes (or will cause) a loss of coverage

Within maximum coverage period

While the plan is subject to COBRA

Loss in anticipation of events

FMLA Leave – qualifying event occurs when employee does not return following leave

Pay attention to plan terms for eligibility – listed event may not cause a loss of coverage, individual may not be QB


Qualifying events for employees: Termination of employment (for reasons other than gross

misconduct)

Reduction in hours of employment

Qualifying events for spouses: Termination of covered employee’s employment (for any

reason other than gross misconduct)

Reduction in hours of covered employee’s employment

Covered employee becoming entitled to Medicare

Divorce or legal separation from covered employee

Death of covered employee


Qualifying events for dependent children:

Loss of dependent child status under plan rules

Termination of covered employee’s employment (for

any reason other than gross misconduct)

Reduction in hours of covered employee’s

employment

Covered employee becoming entitled to Medicare

Divorce or legal separation of covered employee

Death of covered employee

#7 – Giving No Information

Plan administrators are required to provide certain

information to plan participants and beneficiaries and

QBs

COBRA Notice Rules

Set minimum standards for timing and content of

COBRA notices

Require reasonable procedures for providing notices

Not providing timely/proper notices puts plan at risk

Avoid problems by establishing procedures for sending

notices

COBRA Notices – General Notice

Provides information to plan participants regarding COBRA and plan procedures

Must be provided within 90 days after plan coverage begins

Must be written to be understood by average plan participant

May be provided in Summary Plan Description

Single notice can be provided to employee and spouse at same address

COBRA Notices – Election Notice

Gives QBs information about rights and obligations

regarding a specific qualifying event and coverage

Must be provided to QBs within 14 days after plan

administrator is notified of Qualifying Event

If employer is plan administrator, notice must be

provided within 44 days of qualifying event or loss of

coverage (whichever is later)

COBRA Notices –

Notice of Unavailability

Plan administrator must notify individual with

explanation of why s/he is not entitled to COBRA

coverage

No Qualifying Event has occurred

QB did not furnish required notice

QB did not provide complete information

Deadline is same as that for sending election notice

Generally must give notice of COBRA ineligibility

within 14 days after receipt of notice of Qualifying

Event

COBRA Notices –

Notice of Early Termination

Plan administrator must notify QBs when

continuation coverage terminates before the end

of the maximum coverage period

Timing – must notify as soon as practicable

Must contain the following information:

Reason for early termination

Date coverage terminated or will terminate

Available conversion rights

COBRA Notices – Employer’s

Notice of Qualifying Event

Employer must notify plan administrator within 30

days of the later of qualifying event or loss of

coverage

Notice must be given of employee’s death,

termination of employment, reduction in hours of

employment, Medicare entitlement

Must include sufficient information to determine plan,

employee, qualifying event and date

No notice necessary where employer is plan

administrator

#6 – Giving Bad Information

General Notice – Required Content Plan name Name, address and phone number for contact person for

information about the plan and COBRA Description of COBRA coverage under the plan Plan procedures for QBs to provide notice of certain

qualifying events Plan procedures for QBs to provide notice of SSA

determination of disability Statement that notice does not fully describe COBRA or

other rights and plan administrator and SPD can provide more info

Importance of advising administrator if address changes

Model notice available


Election Notice – Required Content

Plan name and name, address and phone number for contact person for information about the plan and COBRA

Identification of the qualifying event

Date plan coverage will terminate

Identification of the QBs by status or name

Statement that each QB has independent right to elect coverage

Description of COBRA coverage

Amount each QB required to pay and procedures for making payments

Explanation of how to elect coverage and date by which election must be made

Consequences of failing to elect or waiving COBRA


Election Notice, continued

Explanation of duration of COBRA coverage

Explanation of circumstances where coverage may be extended

QB’s responsibility to provide notice of second qualifying event or SSA disability determination (including procedures for providing notice)

QB’s responsibility to provide notice of determination that QB is no longer disabled

Explanation of importance of keeping plan administrator informed of current address

Statement regarding more complete information

Model notice available

#5 – Not Following Procedures

Plans must establish reasonable notice procedures for covered employees and QBs to notify plan of certain events

Qualifying events: divorce, legal separation, dependent child losing dependent status

Second qualifying events

SSA disability determination (or cessation of disability)

Consequences of not having reasonable procedures

QB deemed to have given notice if s/he has communicated a specific event in a manner reasonably calculated to inform those customarily considered responsible for the plan

Reasonable Notice Procedures

Described in SPD

Specify individual or entity designated to receive

notices

Specify how notice is to be given

May require use of specific form

Must allow covered employee, QB or representative to

provide notice

Describe the information required

Specify deadlines for providing notice

Provide for proper handling of incomplete notices

COBRA Notices – Employee’s

Notice of Qualifying Event

Covered employees and QBs are generally

required to notify plan administrator within 60

days of the later of:

Qualifying event or second qualifying event,

Loss of coverage or

Date they were first notified of notice obligations

Prompt notification decreases risk to plan

COBRA Notices – Employee’s

Notice of Disability Determination

QBs determined to be disabled by SSA are

generally required to notify plan administrator

within 60 days of receipt of disability

determination and before end of original 18-

month continuation coverage period

QBs must notify plan administrator within 30 days

of determination that they are no longer disabled

COBRA Election Procedures

QB must be given at least 60 days to elect COBRA

Election period begins on date election notice is

provided or date on which coverage would be lost

(whichever is later)

Each QB has independent right to elect COBRA

Covered employee or spouse can elect on behalf of

all other QBs and parent or guardian can elect on

behalf of minor child

If QB waives coverage during election period, s/he

can revoke waiver before end of election period

Payment Procedures

Plan can require payment of “applicable premium” for COBRA coverage 102% of employer’s cost

150% for disabled QBs

Premium payments must be made in a timely manner Payment = made when sent

Initial premium = due 45 days after election

Premium due date is usually 1st of month – plan must allow 30 day grace period

Late payments and short payments

Forwarding payments to insurers

#4 – Not Giving Enough Coverage

Continuation coverage provided to QBs must be the same as coverage provided to “similarly situated” individuals covered under the plan (not receiving COBRA coverage)

Intended to be the same coverage the QB had before the qualifying event

QBs entitled to same benefits, rights and privileges that similarly situated participant or beneficiary receives under the plan

Changes to plan’s terms that affect similarly situated participants and beneficiaries apply to QBs receiving COBRA coverage

#3 – Charging Too Much or Too Little

Group health plans can require QBs to pay for COBRA coverage

May choose to provide coverage at a discount or no cost

Maximum COBRA premium cannot exceed 102% of cost to plan for similarly situated plan participants

Disabled QBs receiving disability extension may be charged up to 150% of the plan’s total cost of coverage

COBRA premiums may be increased if plan cost increases, but must be fixed in advance of each 12-month premium cycle

#2 – No Documentation

Notice information and procedures – document in

SPD and notices

Document notices sent

Certificate of mailing

Business records method

Keep records of notices received

Document payments received

Accurate and thorough records will assist in

administration and support plan in event of a claim

#1 – Bad Timing

Maximum coverage period

18 months for termination of employment and reduction

in hours

36 months for death of covered employee, divorce or

separation, covered employee’s entitlement to Medicare

Can be extended or terminated early

Special rule for newborn/adopted children – maximum

coverage period is the remainder of the original

maximum coverage period

Expanding COBRA Coverage

Extended notice rule ➨ permits maximum

coverage period to run from date of loss of

coverage, not date of triggering event

Disability extending rule ➨ extends 18-month

period to 29 months for all related QBs

Multiple qualifying event rule ➨ extends 18-month

period to 36 months for spouse and children

when 2nd qualifying event occurs during initial 18-

month period

Expanding COBRA Coverage

Medicare entitlement rule ➨ extends 18-month

period for spouses and children when covered

employee becomes entitled to Medicare within 18

months before triggering event

Bankruptcy of sponsoring employer ➨ extends

coverage for retired employee, spouse and

dependent children

Terminating COBRA Coverage

COBRA coverage generally terminates at end of maximum coverage period

No notice to QB required

COBRA may be terminated early if:

QB fails to make timely premium payments

Employer ceases to make any health plan available to any employee

QB becomes covered under another group health plan

Disabled QB is determined not to be disabled

For cause

Notice required for early termination

10 Cobra mistakes to Avoid. Accurate Insurance Solutions Tampa, Fl.

Healthcare

Transcript of 10 Cobra mistakes to Avoid. Accurate Insurance Solutions Tampa, Fl.