Consolidated Omnibus Budget Reconciliation Act or as most people refer to it as COBRA, is an important function for all employers who offer health insurance for benefit qualifying employees. Staying compliant with COBRA requirements can be a lot of work and if not handled correctly, can result in hefty fines and penalties. Here are the 5 most common misconceptions regarding COBRA:
1. COBRA only applies to those employees who are fired.
According to the United States Department of Labor, COBRA applies to those with “voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events”. This also applies to young adults who have aged out of their parent’s health insurance plans as well as the spouse of any employee who is Medicare eligible.
2. Who is responsible for COBRA?
This is a bit trickier to answer because there may be multiple parties involved. The employer is ultimately responsible for sending out COBRA notices or notifying a third party plan administrator of the qualifying event. Once the task has been passed to a plan administrator, it is their responsibility to notify the employee of his/her options. Once the employee has been notified, the responsibility falls on him/her to either elect to be enrolled or decline within the deadlines.
3. Are there required time frames to abide by in order to stay in compliance for COBRA?
Yes, there are strict timelines to abide by in order to stay compliant with COBRA. If these time frames are not followed correctly, there may be fines or penalties applied. If the employer has a third party plan administrator, they have 30 days from the time an employee qualifies for COBRA to alert the plan administrator. Once the plan administrator has been notified, they have 14 days to notify the employee of his/her options. When the qualified employee has been notified, the employee then has 60 days to elect coverage. In the event he/she chooses to elect, they will have 45 days to pay the COBRA premiums in full. Ultimately this whole process can take up to 5 months to be completed.
4. COBRA is different coverage.
Many employees want to know what type of coverage they will have when they start their COBRA plans or how much they will be paying for prescriptions. In actuality, employees will be on the exact same plan as they were before. However, the premium that is typically covered by the employer is now entirely the employee’s responsibility.
5. All employers must offer COBRA coverage.
Not all employers are required to offer COBRA. Those that do offer COBRA typically have a health plan and company policies describing who is eligible for company-provided benefits. More often than none, COBRA is applied to those employers with 20 or more employees. Please keep in mind this may change with the new Affordable Care Act requirements going into place.
A lot to take in? COBRA Administration takes a lot of work and follow up. Working with a trusted COBRA Administrator can help alleviate these burdens. Members of the MPAY Network offer COBRA programs that can benefit you. Contact us to see how we can help you get the most out of your workday.