Nuts & Bolts Of Cobra 03 26 08


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Nuts & Bolts Of Cobra 03 26 08

  1. 1. Nuts & Bolts of COBRA Julie Mangrello-Jennings, MSHR March 26, 2008
  2. 2. About the Speaker <ul><li>Married </li></ul><ul><li>Mother of 3 children </li></ul><ul><li>Passion for HR and continued learning – graduated with Masters in HR from Chapman </li></ul><ul><li>PIHRA District 7 (Long Beach) </li></ul><ul><li>My next goal – earn my CEBS designation </li></ul>
  3. 3. Nuts & Bolts of COBRA <ul><li>Why COBRA? </li></ul><ul><li>Who needs to know about COBRA? </li></ul>
  4. 4. Nuts & Bolts of COBRA <ul><li>What is COBRA? </li></ul><ul><ul><li>Consolidated Omnibus Budget Reconciliation Act of 1985 requires Non-Government employers with 20 or more employees to provide the opportunity for continued health insurance for employees who lose their coverage due to a “qualifying event,” such as termination of employment. </li></ul></ul><ul><li>Cal-COBRA </li></ul><ul><ul><li>Applies to Non-Government employers with 2-19 employees. </li></ul></ul>
  5. 5. Nuts & Bolts of COBRA <ul><li>May 26, 2004 – DOL issued final regulations that require: </li></ul><ul><ul><li>Requirements for “ Initial COBRA ” or “ General COBRA ” notification within 90 days of becoming covered under the group plan (corresponds to the statutory requirements for the SPD). </li></ul></ul><ul><ul><li>Must add “ reasonable procedures ” to the SPD. </li></ul></ul><ul><ul><li>Must develop two new notices to inform individuals COBRA is unavailable or has terminated early. </li></ul></ul>
  6. 6. Nuts & Bolts of COBRA <ul><li>Who monitors COBRA compliance? </li></ul><ul><ul><li>Department of Labor : interprets COBRA’s notice and disclosure provisions. </li></ul></ul><ul><ul><li>Department of Treasury : interprets the statute’s substantive provisions (e.g. the definitions of “qualified beneficiary” and “qualifying event,” the duration of COBRA coverage, and the payment of premiums). </li></ul></ul>
  7. 7. What is a “Qualifying Event?” <ul><li>Termination (other than for gross misconduct) </li></ul><ul><li>Reduction of hours of covered employee </li></ul><ul><li>Death of a covered employee </li></ul><ul><li>Divorce or legal separation of covered employee </li></ul><ul><li>Employee’s eligibility for Medicare benefits </li></ul><ul><li>Dependent child ceasing to be a dependent child of the covered employee under the terms of the plan </li></ul>
  8. 8. Who is a “Qualified Beneficiary?” <ul><li>A qualified beneficiary is defined as: </li></ul><ul><ul><li>the covered employee, </li></ul></ul><ul><ul><li>the spouse of the covered employee, </li></ul></ul><ul><ul><li>or the dependent child(ren) of the covered employee </li></ul></ul>
  9. 9. COBRA Key Events Within 45 days of electing coverage. Participating individual must pay initial premium. COBRA will begin the first of the month following loss of other group coverage, therefore, avoiding lapse in coverage. Date COBRA coverage begins Within 60 days after receiving notice. Individuals must notify the company of his/her election to participate under COBRA. Within 14 days after notification to plan administrator. Plan administrator notify the individual and applicable qualified beneficiaries of his/her rights under COBRA. Within 30 days of the “qualifying event.” Notify plan administrator of the “qualifying event.” Time Frames Key Event
  10. 10. Initial COBRA Notice <ul><li>Required content : Sample notice in Appendix to Section 2590.606-1. </li></ul><ul><li>Timing : 90 days from the date an employee first becomes covered under the plan to provide the general notice of COBRA rights to the employee and spouse, as required under ERISA Section 606(a)(1). </li></ul><ul><li>Required recipients : A plan administrator must provide general notice to both a covered employee and spouse. The plan administrator does not need to deliver a separate notice to dependent children. </li></ul>
  11. 11. Election Notice <ul><li>Final rules (29 C.F.R. Section 2590.606-4(b)). Election notice must contain: </li></ul><ul><ul><li>Information about the interplay between COBRA and rights under HIPAA. </li></ul></ul><ul><ul><li>Must include plan contact information. </li></ul></ul><ul><ul><li>May identify qualified beneficiaries either by reference to their status (e.g. employee, spouse, dependent child covered under plan prior to qualifying event) or by name. </li></ul></ul>
  12. 12. What Coverage Must be Offered? <ul><li>The coverage is based on how the employee was enrolled in benefits on the last date of employment. </li></ul><ul><ul><li>Medical </li></ul></ul><ul><ul><li>Dental (contributory or non-contributory) </li></ul></ul><ul><ul><li>Vision </li></ul></ul><ul><ul><li>Medical FSA </li></ul></ul><ul><ul><li>Dependent Care FSA </li></ul></ul><ul><ul><li>Health Reimbursement Arrangement (HRA) </li></ul></ul>
  13. 13. How Much Does COBRA cost? <ul><li>The COBRA misconception </li></ul><ul><li>The Reality: </li></ul><ul><ul><li>Federal COBRA is 102% of current premium for coverage elected. </li></ul></ul><ul><ul><li>Cal-COBRA is 110% of current premium for coverage elected. </li></ul></ul><ul><ul><li>Rates will change upon the anniversary date/plan year. </li></ul></ul>
  14. 14. Length of COBRA Continuation Coverage 36 months Dependent child loses eligibility status 36 months Divorce or death of employed spouse 29 months Federal COBRA; additional 7 months Cal-COBRA (if applicable) Employee is disabled at time of reduction of hours or termination 18 months Federal COBRA; additional 18 months Cal-COBRA (if applicable) Reduction in hours 18 months Federal COBRA; additional 18 months Cal-COBRA (if applicable) Termination for any reason other than gross misconduct None – COBRA does not apply Termination of employment for gross misconduct Length of Continuation (months) Event
  15. 15. Termination of COBRA <ul><li>Continuation coverage will be terminated before the end of the maximum period if: </li></ul><ul><ul><li>Premium is not paid in full on time (Participants have 30 day grace period). </li></ul></ul><ul><ul><li>A qualified beneficiary becomes covered under another group health plan that does not impose any pre-existing condition exclusion. </li></ul></ul><ul><ul><li>The employer ceases to provide any group health plan for its employees. </li></ul></ul>
  16. 16. Reasonable Procedures <ul><li>A procedure is deemed “reasonable” if it satisfies all of the following criteria: </li></ul><ul><ul><li>It is described in the SPD. </li></ul></ul><ul><ul><li>It specifies the individual or entity who is designated to receive notices. </li></ul></ul><ul><ul><li>It specifies the means qualified beneficiaries must give notice (e.g. written). </li></ul></ul><ul><ul><li>It specifies the required content of the notice. </li></ul></ul>
  17. 17. Delivery of COBRA Notices <ul><li>The Initial Notice : Federal law states,” The group health plan shall provide, at the time of commencement of coverage under the plan, written notice to each covered employee and spouse of the employee, if any, of their rights” to continuation coverage. It does not mandate how this notice is to be provided. </li></ul><ul><li>The Election Notice : Federal law states, “The administrator shall notify in the case of a qualifying event…any qualified beneficiary with respect to such event, of such beneficiary’s rights.” Again, no specific method of notification is required. </li></ul><ul><ul><li>Sending notices by mail via U.S. Postal Service first-class mail with a Certificate of Mailing. </li></ul></ul>
  18. 18. Top 5 COBRA Mistakes <ul><li>Using the COBRA forms from 1986. </li></ul><ul><li>Hand delivering COBRA notification to the employee. </li></ul><ul><li>Not providing notification within timely manner OR not offering COBRA coverage at all. </li></ul><ul><li>Not offering COBRA coverage to overage dependents after they no longer qualify for the plan. </li></ul><ul><li>Not giving COBRA notification to a retiree that goes on an employer-provided retiree health plan. </li></ul>
  19. 19. Penalties for Non-Compliance <ul><li>Excise tax (the basic tax is $100 per day per qualified individual, not more that $200 per family, subject to maximum and minimum limitations) (I.R.C. Section 4980B(b)(2)), </li></ul><ul><li>ERISA $110 per day statutory penalties for failure to provide required notices (ERISA Section 502(a)(1)(A), 502(c)(1)(A)), and </li></ul><ul><li>Lawsuits to compel coverage (which can create liability for attorney fees as well) (ERISA Section 502(a)(1)(B)). </li></ul>
  20. 20. Any questions?