Top Three Reasons to Pay Attention to COBRA in 2021

Due to the pandemic, what seemed to be hard and fast rules turned out to be much more flexible. Suddenly, people could take money out of their 401(k) without penalty, late rent was forgiven, and kids didn’t have to get up and go into school every morning. What hasn’t changed is that everyone still needs secure health care access, and COBRA continuation coverage plays into this fact.

COBRA refers to the Consolidated Omnibus Budget Reconciliation Act of 1985, and it’s a federal law that requires employers offering health care benefits to extend coverage options to people who would otherwise lose them due to job loss, leave of absence, or other qualifying events. COBRA legislation doesn’t apply to everyone—but it does apply when employers have a group plan and employ more than 20 people—and can provide temporary coverage to employees and beneficiaries covered by the group plan.

These are the top three reasons employers should pay extra attention to COBRA this year.

1

Pandemic Job Loss and COBRA Compliance

In January 2020, the U.S. had an enviable unemployment rate of 3.6%, and by December 2020, it was nearly double at 6.7% according to the Bureau of Labor Statistics. Of course, due to the upheaval in the national and worldwide economy, businesses have laid off, furloughed, or let go of employees. COBRA provides a safety net to people affected by job loss, which is even more critical during a crisis like a pandemic.

However, providing that safety net comes with some responsibilities. COBRA requires companies to provide notices, and noncompliance in properly distributing those notices can incur (sometimes hefty) fines from the IRS. For instance, employers can be fined an IRS excise tax penalty of $100 per day per failed notice, or $200 per day if the failure affects more than one qualified beneficiary for the same qualifying event.

In addition, there’s also the possibility of facing ERISA (Employee Retirement Income Security Act) penalties of up to $110 a day for noncompliance.

Obviously, one tiny mistake can quickly add up for an employer. Using a specialist for COBRA administration leaves the compliance aspect to professionals. They can also immediately take charge of the administration, processing, and legislative changes.

This works for both the employer and the employee, since the employee is well taken care of, and the employer has an expert on their side to make sure all COBRA-related work is happening the way it’s supposed to happen.

Learn more in our clear, concise eBook, COBRA Administration For Dummies®.

2

Prevent Coverage Gaps with Direct Billing

When COBRA is administered, employees become responsible for paying their own insurance premiums. However, employers are no longer giving them a paycheck, which means they can’t automatically withdraw the premiums through payroll. As a result, it’s sometimes difficult to collect this payment in an organized and timely manner, which makes it harder for employers and employees alike.

In comes direct billing. To alleviate this stressor, administrators can make use of the service of direct billing that will set up a billing and payment process directly between the COBRA recipient and the insurance provider. There is no need for the former employer to collect money from the COBRA recipient and pass it on to the insurance provider, which is easier for everyone involved. Not only does it make certain that employers are following COBRA rules, but it also means that COBRA recipients won’t see a gap in their benefits due to a missed or late payment. In a health crisis, this is obviously something everyone wants to avoid.

Kaiser Family Foundation reports that most of the 26.8 million who are at risk of losing their job-based coverage are eligible to remain in that coverage under COBRA. Clearly, many people are impacted, and direct billing can help everyone involved. Employers can make sure health care is paid for, and employees can make sure there’s no accidental loss in their coverage.

Juli Kline, Director of COBRA Operations at ConnectYourCare, explains, “When I think about what COBRA and direct billing services really represent, it’s about people who find themselves in a period of transition. They are experiencing change, and even if it’s viewed as a positive change, such as a retirement or a future opportunity, it can still be unsettling, especially when it comes to maintaining critical benefits for themselves and their family. These services give employees options, then can provide them with a sense of security when they find themselves in a period of transition.”

Listen to Juli Kline discuss COBRA and direct billing in the ConnectYourCare podcast!

LISTEN NOW

3

Avoid Pitfalls of the Past

If administering COBRA for the first time in a while (or the first time ever!) caught you a little off guard in 2020, now’s the time to reflect, refine your administration processes, and work to avoid any mistakes should you have to administer COBRA again in 2021.

For instance, here are a few common pitfalls in the COBRA administration process, and how to avoid them:

First of all, COBRA recipients have to receive the same choices and benefits as your current employees. This includes the fact that they receive all the same choices during open enrollment, or more likely going forward, during your virtual open enrollment process. Due to this rule, it’s important to communicate all the same information to everyone housed under COBRA rules.

Second, employers must adhere to the rule that they can’t increase COBRA premiums during any 12-month period unless there are benefit changes, the beneficiary changes due to disability status, or if prior COBRA premiums were lower than permitted. It’s difficult to collect underpaid premiums for past coverage, so it’s key that this amount is correct in the first place.

Lastly, there are not only federal laws to comply with, but there are state laws, too! Pay attention to mini-COBRA laws that are specific to your state, since there are requirements for employee eligibility and periods of coverage. It’s always helpful to consult your COBRA administrator, legal counsel, or state insurance department to make sure all the correct rules are being followed.

Want to know more? Head over to the COBRA Academy, where you get:

  • Our “Top 10 Mistakes Employers Make with COBRA Administration” eBook to help administrators avoid costly fines and penalties, plus our COBRA compliance checklist.

  • “The Employer’s Quick Guide to Getting COBRA Right”—An illustrative quick guide of COBRA tips employers, HR professionals, and benefits specialists should know.

  • An on-demand, SHRM-sponsored webinar, overviewing COBRA case law, regulations, common pitfalls, and more.

Clearly, the national and health care landscape has changed and will continue to do so. Our families and our health remain the top priorities, and COBRA is just one method to help everyone along the way

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

By |2021-02-24T12:04:09-05:00February 24th, 2021|Brokers, COBRA, Employer Posts|
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