Continuation of benefits coverage for departing employees is a pretty standard offering, but some companies may be getting it wrong. Could you be one of them? Here are several of the basics we sometimes see employers overlook, along with insights on how COVID has affected the way COBRA works.
Does COBRA apply to you?
The federal Consolidated Omnibus Budget Reconciliation Act, or COBRA, applies to employers with at least 20 employees. Under 20 and you’re off the hook, right? Not exactly. State laws come into play, as well. Missouri employers, for example, must follow the federal COBRA guidelines no matter how many employees they have. In Kansas, the carrier, not the employer, is required to offer continuation coverage. Coverage is also allowed in situations not required by COBRA, such as when an employee is terminated for gross misconduct.
Are you meeting the notice requirements?
COBRA requires employers to provide two notices to employees – the General Notice (when the employee first enrolls in your health plans) and the Election Notice (when they experience a qualifying event that makes them eligible for COBRA).
Many employers overlook the General Notice or assume their COBRA administrator is providing it. It’s less expensive and fairly easy for employers to provide the General Notice as part of your onboarding or enrollment materials. The Department of Labor provides a model notice that you simply need to customize with your company information.
If you’re expecting your COBRA administrator to do it, be sure to cover that during your implementation conversation; it’s often not part of the general contract and therefore will cost you extra.
Are you offering COBRA for extended periods of leave?
If you allow an employee to take additional leave after FMLA, or otherwise take leave that’s not protected by the FMLA, you should require them to use COBRA. If you allow them to stay on your benefits the same as employees who aren’t on leave, your carrier could deny coverage of their medical claims because they don’t meet the “active employee” eligibility criteria. This is especially risky if you’re self-insured. Talk with your broker about it.
Are you offering COBRA for other benefits?
Employers sometimes overlook the requirement to offer COBRA coverage for dental, vision and health FSAs. While employees rarely elect COBRA for these options, it’s important to offer them just in case. How health FSAs work under COBRA is a particularly complicated issue; contact your broker or COBRA administrator if you have any questions.
Do you inform COBRA participants about plan changes and enrollment opportunities?
Be sure to talk with your broker about requirements to notify COBRA participants when you change plans, premiums or other details about your coverage. Also, keep in mind that COBRA participants have the same rights as active employees to change coverage during open enrollment, including adding or dropping spouse and dependent coverage.
Have you prepared for the effects of COVID legislation on your COBRA claims?
COBRA requirements were amended as part of the federal COVID relief. This means departing employees can pose an additional risk to your plans for a longer period.
Departing employees are no longer required to elect COBRA within the first 60 days after a qualifying event. Instead, they can wait until after the end of the COVID emergency period to elect and pay for their coverage. These changes have not been widely publicized, but you should talk them over with your broker or COBRA administrator.
We hope this review of oversights and insights helps you take action to ensure your company is compliant and prepared.