Employer Obligations Under COBRA



Almost all employer sponsored health plans must be in compliance with the Employee Retirement Income Security Act of1974 (ERISA). ERISA was passed to provide a set of guidelines that protect employee benefits in different circumstances. One of the most detailed set of standards in ERISA involves the right to temporary continued health coverage when certain qualifying life events occur. The Consolidated Omnibus Budget Reconciliation Act (COBRA), is something employers need to be aware of when speaking with employees during the hiring process as well as when a qualifying event occurs.

While many managers believe the ability to discuss COBRA fall under HR's responsibilities, the details of employers' responsibilities is something all managers should be able to speak with their employees about should it become necessary. This helps ensure that employees don't fall through the cracks in the case of small or poorly organized HR departments. More importantly, employees may come into contact with HR a few times during the tenure of their employment while they interact with their manager far more frequently and sometimes daily. Employees generally feel greater familiarity and compassion when relating to their manager so it is easier to discuss the often difficult circumstances that are defined as qualifying events. Staying up to date with COBRA regulations protects both the employer and the employee when the criteria for COBRA coverage are met.

Employees entitled to continuing coverage and qualifying events

Employees entitled to COBRA are those who qualified for the employer sponsored health plan on the day before the qualifying event occurred, and their spouses, former spouses and dependents. In the case of the employer filing for bankruptcy sometimes retired employees, their spouses or former spouses and dependent children qualify for COBRA coverage. All children born to or adopted by a covered employee when they are eligible for COBRA are also considered eligible for coverage. Under some conditions, agents, consultants and independent contractors may be eligible.

Qualifying events

The definition of who is covered under COBRA is dependent on the qualifying event. Qualifying events for the employee include being fired for any reason other than "gross misconduct" and reduction in work hours. For spouses, death, divorce or the employee becoming entitled to Medicare makes them eligible. Dependents who age out of being covered under their parents plan are also eligible.

Notice procedures

The details regarding COBRA coverage must be included in the Summary Plan Description provided for the employer sponsored health plan. This must be given to new employees within 90 days of them becoming eligible for the employer health plan. It is important to review the COBRA information with new employees to ensure they are aware of qualifying events and under what conditions they and their family would be eligible for COBRA coverage. There is a time limit on when an employee may elect to participate in extended coverage and employees can lose the chance to enroll due to being unaware of their eligibility.

It is the employer's responsibility to notify the health plan should the qualifying event be job termination, reduction in hours, employee death or employee Medicare eligibility. They have 30 days after the qualifying event occurs to provide notification. The employee is responsible for notifying the plan if the qualifying event is divorce, legal separation or a child aging out of being covered on his parents plan.

Term limits and extensions

The plan must provide the employees and any eligible family members with an election notice within 14 days after receiving notification of eligibility. The notice must describe what the employee's rights are regarding continuation of coverage, amount they will be required to pay, length of time they can be covered for and circumstances that allow an extension of coverage. It must also clearly detail how the employee can take advantage of the coverage continuation should they choose to do so and deadlines for electing the coverage.

The coverage provided must be identical to what was provided to the employee as a benefit. Any changes made to the plan for active employees and their families will also apply to COBRA recipients. Eighteen months of coverage must be provided with loss of coverage possible based on the same set of rules applicable to active employees. Should the beneficiary become disabled during coverage the individual is provided with an additional 11 months of coverage. Should there be a second qualifying event during COBRA coverage an 18 months extension must be offered.

Although COBRA rules and regulations can be involved and difficult to remember, under the law COBRA requirements must be followed. Employers who fail to follow all of the conditions set forth in the COBRA legislation are liable to penalties and other charges so it is in every employer's best interests to know what COBRA entails. It can often benefit an employer to seek help and advice from qualified agents when facing frequent and diverse COBRA claims. An insurance consultation firm such as Wellspring Insurance Agency can often simplify the process and ensure everything runs smoothly without becoming a burden.

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