What You Need to Know About COBRA and How It Is Administered
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances, for instance, voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, or other life events.
Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.
COBRA requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.
COBRA outlines how employees and family members may elect continuation coverage. It also requires employers and plans to provide notice.
The legally required steps to administer COBRA continuation for your Qualified Beneficiaries are as follows:
1. Initial Notification of COBRA Rights
Employers are required by law to notify employees upon hire of their COBRA Rights. This "Initial Rights Notice" explains the options a plan participant has regarding the continuation. COBRA regulations require that this notification be provided when coverage is first available; the employee & dependents need to know their COBRA rights before the qualifying event occurs.
Contact Benefit Insurance Consultants, Inc. if you have any questions about how to administer an Initial Rights Notice.
2. Provide the Election Packet When A Qualifying Event Occurs
Upon notification of a qualifying event by the member, the following should be prepared by the employer. These packets are available through your carrier.
Introductory letter that defines their qualifying event and election time period
Continuation plan election form
Separate family enrollment form
Toll Free phone number for live customer service.
Contact Benefit Insurance Consultants, Inc. for information on how to access and provide a Benefit Election Packet.
3. Election Notification
Once the qualified beneficiary has elected to continue coverage, payment must be remitted to the employer along with benefit election. The carrier must then be notified of election. Employers are required to submit payment on behalf of the qualified beneficiary. It is at the employer's discretion to charge no more than a 2% administration fee to be collected with the premium amount.
For further detail on how to notify the carrier of plan election, contact a BIC-INC representative - we are always more than happy to assist.
5. Benefit Changes, Open Enrollment & Rate Change Notifications
The employer is required to notify the beneficiary of COBRA Coverage of any changes made to their benefit plan, upcoming open enrollment, and any other changes that may affect rates. Generally, you will have a separate COBRA administrator that can distribute all notices to the employee, sometimes for free depending on the carrier, and othertimes for a small fee per employee enrolled.
If the employer chooses to administer COBRA in house, that employer would then be required to notify the beneficiary of changes. With a third-party COBRA administrator, the employer would then be required to notice that TPA of any benefit changes, open enrollment, or other rate change notification to be sent to the beneficiary.
Contact Benefit Insurance Consultants, Inc. for specific detail on how to resource a COBRA Administrator for your group.
6. Terminations and Eligibility Changes
Whether due to nonpayment or reaching the maximum period, the Qualified Beneficiary, the Plan Sponsor, the insurance company and/or TPA should be notified promptly in the event of termination of coverage or Change in Eligibility.
Contact Benefit Insurance Consultants, Inc. for best practice tips and solutions to streamline communication during COBRA notice administration.