The document provides a summary of the top 10 mistakes employers make regarding COBRA and how to avoid them. It discusses mistakes like assuming COBRA doesn't apply to small employers or certain health plans, not understanding qualifying events and beneficiaries, failing to provide required notices, not following reasonable procedures, providing incorrect information in notices, not maintaining proper documentation, and bad timing of coverage periods. The document emphasizes the importance of understanding COBRA requirements, establishing procedures, sending timely and accurate notices, properly documenting actions, and avoiding mistakes that could result in penalties.
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Top 10 cobra mistakes presentation
1. TOP 10 COBRA MISTAKES
(AND HOW TO AVOID THEM)
Brett Webster – AH&T Insurance
(206) 770-3051 - bwebster@ahtins.com
2. 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”
4. #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
5. #9 – Assuming COBRA Doesn’t
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
6. #9 – Assuming COBRA Doesn’t
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
7. #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
8. 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
Pay attention to plan terms for eligibility – listed
event may not cause a loss of coverage, individual
may not be QB
9. What is a Qualifying Event?
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
10. What is a Qualifying Event?
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
11. #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 notices required under COBRA
applicable to calendar-year plans on January 1, 2005
Provided model notices and added two new notice
requirements (unavailability and early termination)
Require reasonable procedures for providing notices
Did not affect substantive COBRA rules
Not providing timely/proper notices puts plan at risk
Avoid problems by establishing procedures for sending
notices
12. 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
Content specified in regs – model notice available
13. 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)
Content specified in regs - model notice available
14. 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 had 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
15. 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
16. 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
17. #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
18. #6 – Giving Bad Information
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
19. #6 – Giving Bad Information
Election Notice, continued
Explanation of how to elect coverage and date by which election
must be made
Consequences of failing to elect or waiving COBRA
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
20. #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
21. 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
22. 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
23. 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
24. 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
25. 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
26. #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
27. #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
28. #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
29. #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
30. 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
31. 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
32. 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