Nowadays, you can have many of your HR functions outsourced to third party administrators (TPAs). One of the most commonly outsourced is COBRA administration. COBRA has countless details and deadlines that can make compliance tricky, and breaking compliance can be extremely costly for business owners. Having a TPA take over your COBRA administration can reduce the risk of noncompliance and save you money in the long run.
COBRA helps former employees and their families keep health coverage when they lose access through an employer. Qualifying events include leaving a company (voluntarily or otherwise), separation, divorce, or employee death. When one of these events occurs, an employer is required to make an offer of continued coverage.
Along with the offer of continued coverage, COBRA requires employers to send notices to employees, former employees, and their spouses and children; to reinstate eligible individuals to health plans; and to calculate and collect premiums. Tracking all of these actions is necessary as well – you need to know who you’ve contacted and who is and is not eligible for coverage.
COBRA administration is overseen by two federal agencies: the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL). Both agencies can penalize noncompliant business owners with charges: $100 per day from the IRS and $110 per day from the DOL. Other financial penalties can come in the form of litigation costs. While it’s rare for the government to prosecute COBRA violations, individual workers may be willing to take you to court.
Outsourcing COBRA administration can be especially helpful to big businesses and businesses with a high turnover rate. More employees means more COBRA responsibilities, which increases your chances of noncompliance. Many companies also appreciate the buffer created by outsourcing COBRA. It’s possible for situations involving insurance to become heated, and most businesses prefer not having to play the role of the bad guy in COBRA administration situations.
Choosing a TPA to handle your COBRA administration needs may feel like a difficult task, but we think it’s really simple. BASIC’s technology-driven solutions grant you the flexibility and power to keep your business running smoothly. We’re experts in compliance and we have been for nearly three decades. Trust us, you’ll be happy you kept it BASIC.