How Direct Billing Can Simplify COBRA Services

Employers and brokers know how tricky it can be to comply with regulations of the Consolidated Omnibus Budget Reconciliation Act of 1985, better known as COBRA. On top of managing COBRA notifications, administration, and compliance hurdles, employers must figure out how to collect insurance premiums and service fees that were previously collected through payroll deductions. This is where direct billing through a trusted partner can bring relief to employers, brokers, and COBRA recipients alike. With direct billing services, employers are liberated from billing past employees for premiums, while employees experience seamless coverage.

To better understand the value of direct billing services, we spoke with ConnectYourCare’s Director of COBRA Operations, Juli Kline, about why employers may want to work with a trusted partner to make direct billing and continuation of coverage easier for everyone involved.

Direct Billing Services for COBRA and Beyond

COBRA is a federal law that requires employers offering health care benefits to extend coverage options to people who would otherwise lose them because of job loss, leave of absence, or other qualifying events. COBRA legislation applies to all employer group health plans when they employ more than 20 people and can provide temporary coverage to employees and beneficiaries who were covered by the group plan.

Many companies offer a wide range of benefits, but to be clear—COBRA covers only health care benefits and nothing more. Even though COBRA doesn’t require the continuation of benefits unrelated to health care, companies can still offer extended benefits through a third-party administrator. These services, which are called direct bill services, are billed directly to the recipient and are a great way to offer non-health care benefits, such as dependent care flexible spending accounts, disability benefits, and life insurance. These services also allow employers to collect premiums for services that are typically collected through payroll deduction.

“Whether employers are dealing with major corporate actions, contingency planning, or other issues, they still have a business to run,” said Kline. “Collecting premiums from employees who are no longer receiving paychecks is cumbersome. We are able to ease that administrative burden on employers.”

Without direct billing, employers would be responsible for collecting premiums from employees who are no longer receiving a paycheck, which is not a desirable or regular duty. This applies to many circumstances, including retirement, a leave of absence, or as part of a severance package. Not only does direct billing help employers by outsourcing difficult work, it can also make employers more attractive to employees.

“People lose sight of the fact that this is part of a broader benefits package that makes employers more competitive in the marketplace,” Kline said. “Over the past several months with emerging health and economic concerns, the need for direct billing services has been amplified. In the past, these services may have been overlooked, but they really serve to alleviate both employer and employee stress.”

ConnectYourCare Podcast:
COBRA Administration
and Direct Billing

Listen as host Carla Wardin talks with Juli Kline, Director of COBRA Operations at ConnectYourCare, about COBRA and direct billing services.

Listen Now

Who is Included in the COBRA and Direct Billing Populations?

COBRA may need to be offered depending on the circumstances surrounding the employee’s direct bill coverage, and there are also direct billing scenarios outside of continuation coverage services. These are some examples of direct billing populations employers should be aware of:

  • Furloughed employees

  • Employees on Family Medical Leave of Absence (FMLA)

  • Retirees

  • Employees on a leave of absence

  • Select vested employees, such as executives
  • Family members of employees who have passed away

Direct billing for COBRA makes it easier for employers to adhere to the rules. As a bonus, direct billing is also a valuable benefit for employees who qualify for these services.

“We’re seeing a lot more direct billing requests due to this year’s circumstances. Employees, now more than ever, are asking these questions–‘What’s the leave of absence policy?’How are my benefits impacted?’” Kline said. “Employees want peace of mind that they can continue to access the care and services they need.”

COBRA law does include deferred loss of coverage verbiage that will allow members to have active coverage beyond termination, and COBRA only needs to be offered if certain criteria are met. For example, employees can only continue coverage if they were already enrolled in the group health plan, and the coverage applies only to the benefits accounts they were actively enrolled in while employed.

As for leave of absence, COBRA would only come into play if the employee on leave of absence is being terminated from the COBRA-eligible plans. If this is the case, then COBRA would be offered to the employee and eligible beneficiaries like a spouse or dependent child. If the employee is still actively employed but on unpaid leave, benefits could be administered through the direct billing services to collect premiums usually deducted from payroll.

Direct Billing Provides a Sense of Security

With direct billing, employees gain the assurance that their benefits will continue, without a gap, if they experience job loss, retirement, or forced leave of absence.

“Whether planned or unplanned, people in need of COBRA and direct bill services are in a state of transition. Employees want to know that if something unexpected happens, they have a sense of security in a world of uncertainty,” Kline said. “When they know these services are out there, they have a safety net for the unknown. They want that sense of security, and we can give it to them.”

For more in-depth information about COBRA, we welcome you to watch our “New Demands of COBRA” webinar.

About the Author:
Carla Wardin lives in St Johns, Michigan, where she focuses her writing on the health and technology industries.

By |2020-11-16T12:02:52-05:00November 5th, 2020|Brokers, COBRA, Employer Posts|
Disclaimer: ConnectYourCare does not provide tax or legal advice. This information is not intended and should not be taken as tax or legal advice. Any tax or legal information in this notice is merely a summary of ConnectYourCare’s understanding and interpretation of some of the current tax regulations and is not exhaustive. You should consult your tax advisor or legal counsel for advice and information concerning your particular situation before making any decisions.

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