Generally, private-sector employers with at least 20 employees may be subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA). This federal law requires certain group health plans to offer temporary continuation coverage to qualified beneficiaries following specified qualifying events — most commonly when an employee leaves the organization.
Compliance involves more than simply tracking who has elected coverage and whether premiums have been paid. Whoever administers the COBRA coverage — whether your organization or a third-party provider — may also be required to provide notice to the affected individual. Understanding these requirements can help you avoid compliance problems if a qualified beneficiary falls behind on payments.
Abide by the rules
Consider a situation in which an employer wants to simplify COBRA administration under its health care plan. Rather than sending bills for premiums or late-payment reminders, the employer relies on qualified beneficiaries to keep track of their own payment obligations. If a qualified beneficiary fails to pay the full amount due by the end of the applicable grace period, the plan terminates coverage.
Is such an approach permissible under the rules? Generally, yes. COBRA doesn’t require plans to send monthly premium bills or payment reminders. Qualified beneficiaries are responsible for making timely premium payments, and plans must provide at least a 30-day grace period for subsequent payments. If the full amount due isn’t received before the grace period expires, the plan can terminate COBRA coverage.
Recognize your responsibility
However, a plan can’t always end coverage without any additional communication. Certain situations require a written notice. Most notably, the plan administrator generally must provide an early-termination notice when a qualified beneficiary’s COBRA coverage ends before the maximum allowable period. This is typically up to 18 months, though longer periods may apply in certain circumstances.
Failure to make a required premium payment is one of the circumstances that can permit COBRA coverage to end early. When termination occurs for this reason, the affected qualified beneficiary must receive a written notice explaining why coverage is ending, the date of termination and any rights the individual may have to enroll in other coverage.
Advance notice isn’t necessarily required in every situation. But the plan administrator needs to provide it “as soon as practicable” (according to federal guidance) after determining that coverage will terminate early.
Undertake proper delivery
COBRA notice requirements extend to how notices are delivered. The notice must be provided using measures reasonably calculated to ensure that the qualified beneficiary will actually receive it.
When a covered employee and spouse live at the same address, one notice addressed to both can usually satisfy the requirement. A notice to a covered employee or spouse can also satisfy the requirement for a dependent child who lives with that person. If qualified beneficiaries live at different addresses and the plan administrator has that information, separate notices generally are required. Depending on the circumstances, COBRA notices may be delivered by hand, first-class mail or electronically when the applicable requirements are met.
Reduce compliance risks
For employers subject to COBRA, keeping up with notice requirements is an important part of managing health care benefits. Careful administration can help reduce compliance risks and provide qualified beneficiaries with the information they need when their coverage changes. Contact us for help identifying all the costs associated with COBRA and other employee benefits your organization offers.
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