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COBRA Compliance Requirements


The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federally-mandated law that generally applies to all group health plans maintained by private-sector employers with at least 20 employees.

In addition, many states have laws similar to COBRA, including those that apply to health insurers of employers with less than 20 employees (sometimes called mini-COBRA).

Essentially, COBRA requires these employers to provide a temporary continuation of group health coverage that otherwise might be terminated - as long as certain conditions are met.

Basic Requirements

COBRA requires continuation coverage to be offered to covered employees, their spouses, their former spouses, and their dependent children when group health coverage would otherwise be lost due to certain specific events. These events - called Qualifying Events - include:
  • Termination or reduction in the hours of a covered employee's employment for reasons other than gross misconduct
  • Divorce or legal separation from a covered employee
  • A covered employee's becoming entitled to Medicare
  • A child's loss of dependent status (and therefore coverage) under the plan
  • The death of a covered employee
While COBRA continuation coverage must be offered, it lasts only for a limited period of time

Some Basic Rules

COBRA gives qualified beneficiaries the right to elect to continue coverage, but that election must be made within a specified period following the occurrence of the qualifying event or the loss of coverage. Some basic rules include:
  • Once a Qualifying Event occurs, the employer, or the employee in certain circumstances, must notify the plan administrator of the occurrence of the qualifying event.
  • For certain Qualifying Events, the employee and/or the employee's covered dependents must notify the employer or plan administrator of the occurrence of the Qualifying Event within sixty (60) days of its occurrence
  • The plan administrator is then required to provide the Qualified Beneficiaries with respect to whom the Qualifying Event triggered the loss in coverage with a notice of their rights and an opportunity to elect COBRA continuation coverage
  • The provision of continuation coverage may be conditioned upon the timely remittance of premiums for the coverage.
  • Employers may require individuals who elect continuation coverage to pay the full cost of the coverage, plus a 2 percent administrative charge
  • While COBRA continuation coverage must generally be provided for the maximum coverage period, there are many exceptions that provide for early termination of COBRA continuation coverage as well as an extension of the initial COBRA continuation coverage period
For most group health plans, there are a number of penalties and remedies that can be enforced by the DOL, as well as against plan fiduciaries and individuals in the event of noncompliance. If a court determines that the plan failed to comply, it may require the plan to pay the medical expenses that were incurred by the qualified beneficiary as if the qualified beneficiary were enrolled in COBRA coverage.

Furthermore, the DOL can impose penalties against the plan administrator for failure to provide timely notices required under the COBRA provisions.

Summary

COBRA has many strict timelines and requirements to which subject employers must adhere. While outsourcing some of your COBRA administration requirements, doing so does not generally remove any liability from employers, so employers should have all employees who touch any portion of COBRA be fully trained.
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