Accurate Insurance Solutions tips for avoiding Cobra penalties and other risks, such as lawsuits to compel coverage and adverse selection of COBRA coverage. 813-994-4114 o

1. TOP 10 COBRA MISTAKES
(AND HOW TO AVOID THEM)

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. COBRA Noncompliance
 IRS excise taxes
 ERISA - $110 statutory penalties
 Lawsuits to compel coverage (and pay attorneys’
fees!)
 Adverse selection
 Inability to terminate coverage

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. #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. #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. #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. 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 – qualifying event occurs when
employee does not return following leave
 Pay attention to plan terms for eligibility – listed
event may not cause a loss of coverage,
individual may not be QB

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. 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. #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
COBRA notices
 Require reasonable procedures for providing notices
 Not providing timely/proper notices puts plan at risk
 Avoid problems by establishing procedures for sending
notices

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

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)

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 has 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. 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. 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. #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. #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
 Explanation of how to elect coverage and date by which
election must be made
 Consequences of failing to elect or waiving COBRA

19. #6 – Giving Bad Information
 Election Notice, continued
 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
 Model notice available

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. 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. 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. 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. 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. 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. #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. #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. #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. #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. 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. 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. 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