fun slides consolidated omnibus budget reconciliation act (cobra)
TRANSCRIPT
on COBRA
Which Health Plans Are Covered?
O Medical Plans for employers that employ 20 or more employees
O Inpatient and outpatient hospital care
O Physician care
O Surgery and other major medical benefits
O Prescription drugs
O Dental and vision care
O Life insurance is not considered "medical care," nor are disability benefits. COBRA does not cover plans that provide only life insurance or disability benefits.
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What Does COBRA Provide to Employees?
O Continued health care coverage to
employees, former employees and/or
qualified beneficiaries after the loss of
previous coverage as a result of certain
qualifying events
O Coverage continues at the same level
provided before the qualifying event
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What are “qualifying events?” O The employer must notify the plan if the qualifying event
is: O Termination or reduction in hours of employment of the
covered employee
O Death of the covered employee
O Covered employee's becoming entitled to Medicare
O Bankruptcy of a private-sector employer O The employer must notify the plan within 30 days after the
event occurs.
O The covered employee or one of the qualified beneficiaries must notify the plan if the qualifying event is: O Divorce
O Legal separation
O A child's loss of dependent status under the plan. O The employee notification can be anything based on the
plan, but not shorter than 60days.
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What are the Maximum Coverage Continuation?
O 18 months in cases involving termination
and/or a reduction in hours
O 29 months in certain cases involving
disability
O 36 months in cases involving the death of
a covered employee, or divorce
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Max Grid
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Qualifying
Event
Qualified
Beneficiaries
Maximum Period
of Coverage
Termination (for reasons other
than gross misconduct) or
reduction in hours of
employment
Employee
Spouse
Dependent Child
18 months
Employee enrollment in
Medicare
Spouse
Dependent Child 36 months
Divorce or legal separation Spouse
Dependent Child 36 months
Death of employee Spouse
Dependent Child 36 months
Loss of "dependent child"
status under the plan Dependent Child 36 months
How Long Does a Participant have to Elect Coverage?
O 60 days from the date of the qualifying
event or the date the election notice is
provided, whichever is later.
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Who Covers the Premium Cost?
O The Plan can require the participant to
cover the total premium cost, including
any portion of the premium generally by
the employer on behalf of active
employees.
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When Can the Coverage Be Cut Off?
O A participant fails to pay required
premiums
O Employer discontinues health care plan (if
changing for Open Enrollment, COBRA
must be offered with the new plan until
participant meets Coverage limit).
O Under certain circumstances where
participant obtains subsequent coverage.
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What Records Must Be Retained?
O There are no record limits on COBRA
O However experts recommend that records
be maintained for 6 years from the date of
the record to remain consistent with
ERISA requirements.
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Required Notices
O COBRA General Notice: Notice describing COBRA rights must be provided to participants within 90 days after participation in health care plan begins
O Qualifying Event Notice: Employers generally must provide plan administrators with notice within 30 days of the occurrence of a qualifying event
O Plan administrator must provide participants with an election notice of COBRA rights within 14 days of a qualifying event (44 days if the plan administrator is also the employer)
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COBRA and ACA Reporting
O Use Form 1095-C to report coverage of COBRA participants.
O If the employer cannot obtain a Social Security number for the Cobra participant, the employer may report on 1095-B.
O IRS.gov provides specific guidance on reporting terminated employees, loss of coverage due to reduction in hours, and an independent family member who elects COBRA
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What are the Potential Penalties? O Monetary penalties
O ERISA Violations: Violations after 7/29/97: up to $110 per day per violation; Other judgments, costs or damages
O IRS Violations: Nondeductible excise tax of up to $100 per day per violation for each qualifying beneficiary (i.e., family of four would result in an excise tax of $400 per day) during the noncompliance period.
O Public Health Service Violation: Applicable to state and local governments; Actions for appropriate equitable relief
O Private Lawsuit: Employers and Plans can be liable for payment of health care claims and fines (courts have been known to award attorney’s fees in connection with these suits).
O Even if a Third Party Administrator handles your COBRA Admin, the Employer can still be liable for penalties. (see Pierce v. Visteon Corp. - $1.8 million)
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What you can do to Stay on the Safe Side of COBRA!
O Notify all participants about ay changes in health benefits.
O Offer COBRA to all participants if a plan changes for Open
Enrollment. Either receive a waiver or track with certified mail.
O Each family member must be given a form to complete
separately in the Cobra Notice.
O Ensure notices go out on time and accurately
O COBRA liability can exist even if an individual isn’t harmed —
failing to provide a COBRA notice is enough to trigger litigation
O The clock starts running on the amount of time an employer
has to present a COBRA election notice to an employee on the
qualifying event date and not the date a clerical error is
discovered.
O Obtaining individual coverage isn’t enough to render a person
ineligible for COBRA benefits, only coverage obtained through
an employer group health plan can terminate COBRA eligibility.
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