What Is COBRA Insurance (Coverage) and Who Must Offer?
What is COBRA insurance (coverage) and who is required to offer it? Employers need to understand their responsibilities with COBRA to stay compliant and avoid fines and litigation.
What is COBRA insurance (coverage)?
The first thing to know about COBRA is there isn’t actually COBRA insurance. The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows health plan participants to temporarily continue coverage that was lost due to a qualifying event.
For employers, this means those with benefit plans subject to COBRA are required to offer continuation coverage to an eligible participant within regulations that must be followed to avoid large financial payouts via noncompliance violations or lawsuits.
If you’re an employer who offers a group health plan subject to COBRA, compliance is essential.
Now that we know what COBRA coverage is, what exactly is a group health plan?
- A plan, fund or program;
- Established or maintained by an employer;
- Provides some type of medical care
Examples of group health plans subject to COBRA include**:
– Prescription Drug
– Health Flexible Spending Accounts
– Health Reimbursement Accounts
– Substance Abuse
– Mental Health
Examples of plans that are NOT subject to COBRA include**:
– Life Insurance
– Short-term Disability
– Long-term Disability
– Accidental Death & Dismemberment
– Dependent Care FSA
– Health Savings Account Contributions
– Medical Savings Account
– Workers’ Compensation
– Long-term Care Plan
– On-site Gyms
The Department of Labor offers a list of FAQs and answers regarding COBRA which can be found here.
Risks of In-House COBRA Administration
Employers are required to provide COBRA notices to plan participants in numerous situations, but while the guidelines for administering COBRA are transparent, it’s often the incomplete details of a COBRA notice that can land an employer in hot water. Mistakes as small as not listing the name and contact information for the COBRA administrator can constitute noncompliance. Even when using the Department of Labor’s (DOL) COBRA model notices, required fields are often completed incorrectly or skipped by mistake.
The DOL penalty is up to $110/day payable to the employee or beneficiary, and such other relief as the court(s), in its discretion, may impose for failure to satisfy notification requirements.
An Excise tax of $100/day or $200/day per family depending on number of affected individuals, until employees receive an adequate notice.
Class action lawsuits may leave employers on the hook for hundreds of thousands of dollars.
How can I avoid COBRA fines and lawsuits?
Fortunately for employers, BASIC specializes in compliance to help you avoid COBRA violation penalties. For over 30 years, BASIC’s proven administration model and industry certified experts have helped employers of all sizes across the United States remain compliant and avoid devastating legal payouts. Our superior technology and best-in-class employer tools allow us to exceed DOL notification timeframe guidelines and drastically reduce an employer’s risk. And since COBRA compliance can be complicated when administered correctly, outsourcing COBRA to BASIC frees up valuable time and energy that is better spent managing your active employees.
Don’t become another COBRA lawsuit headline. Request a proposal for BASIC COBRA Administration today!