Four COBRA Housekeeping Questions For The New Year

Happy New Year!

Now that 2015 has arrived, many of you are focused on the final stages of PPACA compliance. That’s good, but don’t forget about the basics of COBRA administration. To keep employers compliant, brokers should ask employers four COBRA-administration questions at the start of each year:

Is your COBRA-administration service missing in action?

This sounds dramatic, but it’s a situation that’s more common than you might expect. When employers change carriers, they need to verify that COBRA-administration services remain intact. Sometimes COBRA- administration arrangements come as a bundled service, and when a plan is terminated, so is the COBRA administration. Check on all health, dental and flexible spending plans.

If COBRA administration has fallen through the cracks, employers have to act fast to avoid missing critical deadlines. Also, COBRA plan participants need to be notified of administration changes so checks are sent to the correct place. As always, insurance brokers should make it clear that they are not COBRA administrators. Don’t be tempted to attempt to fill the
COBRA-administration role as a token of good customer service—your good intentions could lead to serious E&O issues. If your client needs a COBRA administrator, here are a few things to consider:

  • Search for a COBRA administration specialist, not a general administrator that happens to also handle COBRA.
  • Find a company with a compliance guarantee, backed by professional liability insurance.
  • Make sure to get a solid, written contract.
  • Compare response times. A Web-based administrator may be able to get your employer online on a same-day basis and into compliance quickly, while other administrators might take 60 days to achieve the same results.

Have carrier invoices been thoroughly audited since new plans took effect?

When employers change carriers at the beginning of the year, mistakes sometimes ensue. Employers should reconcile carrier invoices with the new rate, matching participant names and figures exactly. By taking a lackadaisical approach, coverage may be left in “active status” by mistake and the overpayments can add up fast.

Unfortunately, an employer has a short window of opportunity to recover money because most carrier look-back periods are only 30 to 60 days. To avoid overpayments, we recommend that employers terminate participants from the bill as soon as they provide a termination notice to the former employee. Then, if the participant pays for another month, the employer should reinstate coverage. It may be an administrative hassle but it prevents costly overpayments and saves money.

Have COBRA General Rights Notices been mailed for 2015?

As a best practice, employers with group health plans should mail out new COBRA General Rights Notices annually, with proof of mailing from the U.S. Postal Service. While some may argue that this is a strict interpretation of DOL guidelines, it is a smart proactive measure for employers. The COBRA General Rights notice explains the obligations of plan participants including that they must notify employers of address changes, divorces, disabilities, Medicare entitlements and other status changes. If they fail to provide the required notice, the employer has a much stronger record if it can prove that the annual notices were sent in compliance with DOL guidelines. Remember, the COBRA General Rights Notice exists to protect employers just as much as it protects plan participants.

Are procedures in place to facilitate 1095 reporting?

Employer-sponsored coverage, including self-insured plans, COBRA coverage and retiree coverage, falls under the scope of Minimal Essential Coverage (MEC) and has to be reported. To administer the individual mandate and to determine if an employer is liable for a shared responsibility penalty, the IRS has created three new forms: 1095-A, 1095-B and 1095-C. With regard to COBRA administration, it’s important to remember that COBRA qualifies as Minimal Essential Coverage and therefore must be reported.

While it’s true that housekeeping is never fun, it is satisfying. Once employers have answered the four questions above, and taken any needed actions, they will feel more confident in their 2015 compliance. They’ll also have increased confidence in you as their broker. By sharing important COBRA reminders, you’re providing a value-added service, building loyalty, and positioning yourself for long-term success.

Note: Story courtesy of NAHU. Read entire issue here


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