TOP 10 COBRA MISTAKES(AND HOW TO AVOID THEM)    Brett Webster – AH&T Insurance     (206) 770-3051 - bwebster@ahtins.com
Introduction to COBRA   Consolidated Omnibus Budget Reconciliation    Act   COBRA continuation coverage = temporary    c...
COBRA Penalties   IRS excise taxes   ERISA - $110 statutory penalties   Lawsuits to compel coverage (and pay    attorne...
#10 – Assuming COBRA Doesn’t              Apply to You   COBRA applies to group health plans for    employers with 20 or ...
#9 – Assuming COBRA Doesn’t              Apply to Your Plan   COBRA applies to group health plans maintained    by employ...
#9 – Assuming COBRA Doesn’t              Apply to Your Plan   Health plans not subject to COBRA:       Long-term care pl...
#8 – Not Knowing Your Qualifying        Events or Qualified Beneficiaries   Qualifying events trigger COBRA coverage for ...
What is a Qualifying Event?   Elements of a qualifying event:     Specified triggering event     Causes (or will cause)...
What is a Qualifying Event?   Qualifying events for employees:       Termination of employment (for reasons other than g...
What is a Qualifying Event?   Qualifying events for dependent children:     Loss of dependent child status under plan ru...
#7 – Giving No Information   Plan Administrators are required to provide certain    information to plan participants and ...
COBRA Notices – General Notice   Provides information to plan participants regarding    COBRA and plan procedures   Must...
COBRA Notices – Election Notice   Gives QBs information about rights and obligations    regarding a specific qualifying e...
COBRA Notices –                Notice of Unavailability   Plan administrator must notify individual with explanation    o...
COBRA Notices –          Notice of Early Termination   Plan administrator must notify QBs when    continuation coverage t...
COBRA Notices – Employer’s         Notice of Qualifying Event   Employer must notify plan administrator within 30 days   ...
#6 – Giving Bad Information   General Notice – Required Content       Plan name       Name, address and phone number fo...
#6 – Giving Bad Information   Election Notice – Required Content       Plan name and name, address and phone number for ...
#6 – Giving Bad Information   Election Notice, continued       Explanation of how to elect coverage and date by which el...
#5 – Not Following Procedures   Plans must establish reasonable notice procedures for    covered employees and QBs to not...
Reasonable Notice Procedures   Described in SPD   Specify individual or entity designated to receive notices   Specify ...
COBRA Notices – Employee’s          Notice of Qualifying Event   Covered employees and QBs are generally required    to n...
COBRA Notices – Employee’s      Notice of Disability Determination   QBs determined to be disabled by SSA are    generall...
COBRA Election Procedures   QB must be given at least 60 days to elect COBRA   Election period begins on date election n...
Payment Procedures   Plan can require payment of “applicable premium” for    COBRA coverage       102% of employer’s cos...
#4 – Not Giving Enough Coverage   Continuation coverage provided to QBs must be the    same as coverage provided to “simi...
#3 – Charging Too Much or Too Little   Group health plans can require QBs to pay for COBRA    coverage       May choose ...
#2 – No Documentation   Notice information and procedures – document in SPD    and notices   Document notices sent     ...
#1 – Bad Timing   Maximum coverage period       18 months for termination of employment and reduction in        hours   ...
Expanding COBRA Coverage   Extended notice rule ➨ permits maximum coverage    period to run from date of loss of coverage...
Expanding COBRA Coverage   Medicare entitlement rule ➨ extends 18-month    period for spouses and children when covered  ...
Terminating COBRA Coverage   COBRA coverage generally terminates at end of    maximum coverage period       No notice to...
QUESTIONS???
Thank You for Your Participation!                       Content © 2009-2010 Zywave, Inc. All rights reserved.   Rev. 12/09...
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Top 10 cobra mistakes presentation

  1. 1. TOP 10 COBRA MISTAKES(AND HOW TO AVOID THEM) Brett Webster – AH&T Insurance (206) 770-3051 - bwebster@ahtins.com
  2. 2. Introduction to COBRA Consolidated Omnibus Budget Reconciliation Act COBRA continuation coverage = temporary continuation of health coverage at group rates Available to “Qualified Beneficiaries” upon occurrence of “Qualifying Events”
  3. 3. COBRA Penalties IRS excise taxes ERISA - $110 statutory penalties Lawsuits to compel coverage (and pay attorneys’ fees!) Adverse selection Inability to terminate coverage
  4. 4. #10 – Assuming COBRA Doesn’t Apply to You COBRA applies to group health plans for employers with 20 or more employees Small employer exemption Rule is – 20 or more employees on more than 50% of typical business days in the previous calendar year  Count full-time and part-time employees  Part-time employees = fraction
  5. 5. #9 – Assuming COBRA Doesn’t Apply to Your Plan COBRA applies to group health plans maintained by employers Health plans subject to COBRA:  Medical, dental, vision and Rx plans  Drug and alcohol treatment program  Employee assistance plans that provide medical care  On-site health care  Health FSAs and HRAs  Self-funded medical reimbursement plans  Wellness programs that provide medical care
  6. 6. #9 – Assuming COBRA Doesn’t Apply to Your Plan Health plans not subject to COBRA:  Long-term care plans  AD&D plans  Group term life insurance plans  LTD & STD plans  Wellness programs or employee assistance programs that do not provide medical care  Exercise or fitness centers  Onsite first-aid facilities Cancelling plan doesn’t always cancel COBRA responsibility  If employer continues to provide any group health plan, obligation to provide COBRA coverage continues
  7. 7. #8 – Not Knowing Your Qualifying Events or Qualified Beneficiaries Qualifying events trigger COBRA coverage for qualified beneficiaries (QBs) Who is a QB?  An individual covered by a group health plan on the day before a qualifying event  Employee, employee’s spouse, employee’s dependent children  Sometimes includes retired employee and spouse and dependent children  Any child born to or placed for adoption with covered employee during COBRA coverage period  May include agents, independent contractors and directors
  8. 8. What is a Qualifying Event? Elements of a qualifying event:  Specified triggering event  Causes (or will cause) a loss of coverage  Within maximum coverage period  While the plan is subject to COBRA Loss in anticipation of events FMLA Leave Pay attention to plan terms for eligibility – listed event may not cause a loss of coverage, individual may not be QB
  9. 9. What is a Qualifying Event? Qualifying events for employees:  Termination of employment (for reasons other than gross misconduct)  Reduction in hours of employment Qualifying events for spouses:  Termination of covered employee’s employment (for any reason other than gross misconduct)  Reduction in hours of covered employee’s employment  Covered employee becoming entitled to Medicare  Divorce or legal separation from covered employee  Death of covered employee
  10. 10. What is a Qualifying Event? Qualifying events for dependent children:  Loss of dependent child status under plan rules  Termination of covered employee’s employment (for any reason other than gross misconduct)  Reduction in hours of covered employee’s employment  Covered employee becoming entitled to Medicare  Divorce or legal separation of covered employee  Death of covered employee
  11. 11. #7 – Giving No Information Plan Administrators are required to provide certain information to plan participants and beneficiaries and QBs COBRA Notice Rules - set minimum standards for timing and content of notices required under COBRA  applicable to calendar-year plans on January 1, 2005  Provided model notices and added two new notice requirements (unavailability and early termination)  Require reasonable procedures for providing notices  Did not affect substantive COBRA rules Not providing timely/proper notices puts plan at risk Avoid problems by establishing procedures for sending notices
  12. 12. COBRA Notices – General Notice Provides information to plan participants regarding COBRA and plan procedures Must be provided within 90 days after plan coverage begins Must be written to be understood by average plan participant May be provided in Summary Plan Description Single notice can be provided to employee and spouse at same address Content specified in regs – model notice available
  13. 13. COBRA Notices – Election Notice Gives QBs information about rights and obligations regarding a specific qualifying event and coverage Must be provided to QBs within 14 days after plan administrator is notified of Qualifying Event If employer is plan administrator, notice must be provided within 44 days of qualifying event or loss of coverage (whichever is later) Content specified in regs - model notice available
  14. 14. COBRA Notices – Notice of Unavailability Plan administrator must notify individual with explanation of why s/he is not entitled to COBRA coverage  No Qualifying Event had occurred  QB did not furnish required notice  QB did not provide complete information Deadline is same as that for sending election notice Generally must give notice of COBRA ineligibility within 14 days after receipt of notice of Qualifying Event
  15. 15. COBRA Notices – Notice of Early Termination Plan administrator must notify QBs when continuation coverage terminates before the end of the maximum coverage period Timing – must notify as soon as practicable Must contain the following information:  Reason for early termination  Date coverage terminated or will terminate  Available conversion rights
  16. 16. COBRA Notices – Employer’s Notice of Qualifying Event Employer must notify plan administrator within 30 days of the later of qualifying event or loss of coverage Notice must be given of employee’s death, termination of employment, reduction in hours of employment, Medicare entitlement Must include sufficient information to determine plan, employee, qualifying event and date No notice necessary where employer is plan administrator
  17. 17. #6 – Giving Bad Information General Notice – Required Content  Plan name  Name, address and phone number for contact person for information about the plan and COBRA  Description of COBRA coverage under the plan  Plan procedures for QBs to provide notice of certain qualifying events  Plan procedures for QBs to provide notice of SSA determination of disability  Statement that notice does not fully describe COBRA or other rights and plan administrator and SPD can provide more info  Importance of advising administrator if address changes Model notice available
  18. 18. #6 – Giving Bad Information Election Notice – Required Content  Plan name and name, address and phone number for contact person for information about the plan and COBRA  Identification of the qualifying event  Date plan coverage will terminate  Identification of the QBs by status or name  Statement that each QB has independent right to elect coverage  Description of COBRA coverage  Amount each QB required to pay and procedures for making payments
  19. 19. #6 – Giving Bad Information Election Notice, continued  Explanation of how to elect coverage and date by which election must be made  Consequences of failing to elect or waiving COBRA  Explanation of duration of COBRA coverage  Explanation of circumstances where coverage may be extended  QB’s responsibility to provide notice of second qualifying event or SSA disability determination (including procedures for providing notice)  QB’s responsibility to provide notice of determination that QB is no longer disabled  Explanation of importance of keeping plan administrator informed of current address  Statement regarding more complete information
  20. 20. #5 – Not Following Procedures Plans must establish reasonable notice procedures for covered employees and QBs to notify plan of certain events  Qualifying events: divorce, legal separation, dependent child losing dependent status  Second qualifying events  SSA disability determination (or cessation of disability) Consequences of not having reasonable procedures  QB deemed to have given notice if s/he has communicated a specific event in a manner reasonably calculated to inform those customarily considered responsible for the plan
  21. 21. Reasonable Notice Procedures Described in SPD Specify individual or entity designated to receive notices Specify how notice is to be given  May require use of specific form  Must allow covered employee, QB or representative to provide notice Describe the information required Specify deadlines for providing notice Provide for proper handling of incomplete notices
  22. 22. COBRA Notices – Employee’s Notice of Qualifying Event Covered employees and QBs are generally required to notify plan administrator within 60 days of the later of:  Qualifying event or second qualifying event,  Loss of coverage or  Date they were first notified of notice obligations Prompt notification decreases risk to plan
  23. 23. COBRA Notices – Employee’s Notice of Disability Determination QBs determined to be disabled by SSA are generally required to notify plan administrator within 60 days of receipt of disability determination and before end of original 18-month continuation coverage period QBs must notify plan administrator within 30 days of determination that they are no longer disabled
  24. 24. COBRA Election Procedures QB must be given at least 60 days to elect COBRA Election period begins on date election notice is provided or date on which coverage would be lost (whichever is later) Each QB has independent right to elect COBRA Covered employee or spouse can elect on behalf of all other QBs and parent or guardian can elect on behalf of minor child If QB waives coverage during election period, s/he can revoke waiver before end of election period
  25. 25. Payment Procedures Plan can require payment of “applicable premium” for COBRA coverage  102% of employer’s cost  150% for disabled QBs Premium payments must be made in a timely manner  Payment = made when sent  Initial premium = due 45 days after election  Premium due date is usually 1st of month – plan must allow 30 day grace period Late payments and short payments Forwarding payments to insurers
  26. 26. #4 – Not Giving Enough Coverage Continuation coverage provided to QBs must be the same as coverage provided to “similarly situated” individuals covered under the plan (not receiving COBRA coverage) Intended to be the same coverage the QB had before the qualifying event QBs entitled to same benefits, rights and privileges that similarly situated participant or beneficiary receives under the plan Changes to plan’s terms that affect similarly situated participants and beneficiaries apply to QBs receiving COBRA coverage
  27. 27. #3 – Charging Too Much or Too Little Group health plans can require QBs to pay for COBRA coverage  May choose to provide coverage at a discount or no cost Maximum COBRA premium cannot exceed 102% of cost to plan for similarly situated plan participants Disabled QBs receiving disability extension may be charged up to 150% of the plan’s total cost of coverage COBRA premiums may be increased if plan cost increases, but must be fixed in advance of each 12- month premium cycle
  28. 28. #2 – No Documentation Notice information and procedures – document in SPD and notices Document notices sent  Certificate of mailing  Business records method Keep records of notices received Document payments received Accurate and thorough records will assist in administration and support plan in event of a claim
  29. 29. #1 – Bad Timing Maximum coverage period  18 months for termination of employment and reduction in hours  36 months for death of covered employee, divorce or separation, covered employee’s entitlement to Medicare Can be extended or terminated early Special rule for newborn/adopted children – maximum coverage period is the remainder of the original maximum coverage period
  30. 30. Expanding COBRA Coverage Extended notice rule ➨ permits maximum coverage period to run from date of loss of coverage, not date of triggering event Disability extending rule ➨ extends 18-month period to 29 months for all related QBs Multiple qualifying event rule ➨ extends 18-month period to 36 months for spouse and children when 2nd qualifying event occurs during initial 18-month period
  31. 31. Expanding COBRA Coverage Medicare entitlement rule ➨ extends 18-month period for spouses and children when covered employee becomes entitled to Medicare within 18 months before triggering event Bankruptcy of sponsoring employer ➨ extends coverage for retired employee, spouse and dependent children
  32. 32. Terminating COBRA Coverage COBRA coverage generally terminates at end of maximum coverage period  No notice to QB required COBRA may be terminated early if:  QB fails to make timely premium payments  Employer ceases to make any health plan available to any employee  QB becomes covered under another group health plan  Disabled QB is determined not to be disabled  For cause Notice required for early termination
  33. 33. QUESTIONS???
  34. 34. Thank You for Your Participation! Content © 2009-2010 Zywave, Inc. All rights reserved. Rev. 12/09, 6/10 ES

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