COBRA is a law that places numerous demands on employers. Preventing mistakes before they happen can keep plans in compliance with the law and avoid costly penalties.
The following is a list of common mistakes that plans make when administering COBRA. If there is any question as to how COBRA applies to a particular plan, consult with a trusted attorney or contact one of the benefits professionals at McSweeney & Ricci.
Thinking Your Group Plan is Not Subject to COBRA (or That You Don’t Have a Group Health Plan)
Both full- and part-time employees are counted to determine whether a plan meets COBRA’s 20-employee threshold. Each part-time employee counts as a fraction of a full-time employee, equal to the number of hours the part-time employee worked divided by the hours an employee must work to be considered full-time.
Some employers who meet this threshold mistakenly believe that COBRA does not apply to arrangements outside of major medical coverage. Keep in mind that for purposes of COBRA, a group health plan includes any arrangement an employer establishes or maintains to provide employees or their families with medical care, such as hospital and physician care, prescription drugs and dental and vision care. The definition of “group health plan” is also broad enough to include, in many instances, Health Reimbursement Arrangements and Health Flexible Spending Arrangements offered by an employer.
Forgetting About State Law
Many states have enacted what are commonly referred to as “mini-COBRA” laws, which typically require continuation of group health plan coverage provided by employers with fewer than 20 employees. States may also have different requirements for employee eligibility and different maximum periods of coverage. Employers of all sizes should consult with employment law counsel and/or their state insurance departments to determine if a state mini-COBRA law applies to their plans and if so, how the state’s law differs from federal COBRA.
Not Sending Required Notices or Providing Inaccurate or Insufficient Information in the Notices
Group health plans are required to provide qualified beneficiaries with specific notices explaining their COBRA rights, with very specific requirements as to what information must be included in these notices. One way to avoid mistakes is to use the Model General Notice and the Model Election Notice provided by the U.S. Department of Labor, filling in the blanks with your plan information. Other notices, such as the Notice of Unavailability of Continuation Coverage and the Notice of Early Termination of COBRA Coverage, should be sent to qualified beneficiaries as necessary.
(This Information has been provided by HR & Benefits Essentials)