COBRA
What is COBRA?
Employer groups with 20 or more employees are subject to Federal COBRA laws.
The Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") was
passed to temper the increasing rates of uninsured Americans. As a result
of economic recession in the 1980's, many working Americans lost their jobs,
and these job losses initiated loss of employer-sponsored health coverage for
those workers and their families.
The continuation coverage requirement forces employers to offer insurance continuation to anyone who would otherwise lose coverage due to a qualifying event. A qualifying event is any one of the following that causes a loss of coverage:
- Termination of employment or reduction of hours
- Divorce or legal separation
- Death of the covered employee
- Covered employee becomes entitled to Medicare
- Dependent ceases to be eligible as a dependent under the terms of the plan
- Employer's filing of a bankruptcy proceeding (applies only to retirees)
In addition, employers must provide written notification to all covered employees and their dependents of their rights under COBRA. This notification of rights must be provided (1) upon inception of coverage, (2) in the summary plan description, and (3) upon the occurrence of a qualifying event.
The Internal Revenue Service, the Department of Labor, and the Department of Health and Human Services jointly enforce COBRA. Penalties for COBRA violations include, but are not limited to:
- Excise tax penalties of $100 per day ($200 if more than one family member is affected) may me assessed for each day the employer fails to comply with COBRA Statutory penalties of up to $110 per day under the Employee Retirement Income Security Act ("ERISA")
- Civil lawsuits
- Attorney's fees and interest
Is my Company Required to Offer COBRA to Employees?
To be subject to COBRA, your organization must have employed 20 or
more workers on at least half of your regular business days in the last
calendar year, and you must currently provide a group health plan.
Group health plans include the following benefits:
- Medical Insurance
- Dental Insurance
- Vision Insurance
- Medical reimbursement flexible spending accounts
- Employee Assistance Programs (EAP) that provide more than referrals
- Prescription drug plan
If your Company is subject to COBRA, you should be able to
answer "yes" to all of the
following questions:
- Do you provide initial COBRA Notifications to covered employees and their dependents once they become covered?
- Are employees and their dependents given an opportunity to continue their COBRA when a qualifying event occurs?
- Can you prove that you provide initial COBRA notifications and COBRA election information, and that the information is provided within the time period mandated by COBRA?
- Do you know what the qualifying events are under COBRA?
- Are you complying with HIPAA privacy and portability rules?
- Are you complying with COBRA timelines? Do you know how long you have to send a COBRA notice after a qualifying event occurs? How long the election period? What the two grace periods for payment of premium are and the duration of each?
- Do you adjudicate eligibility and participation consistently?
- Are you monitoring the effect of COBRA participants on your experience rating?
- Are you maintaining COBRA records? Do you know how long you are required to store these records before they may safely be destroyed?
- Do you know the penalties and liabilities associated with COBRA violations?
- Did you know that COBRA violations are not covered by General Liability Insurance
