When we talk to administrators who are prospective COBRApoint customers about their businesses and the services Benaissance provides, we often talk about the “big moving parts” of a COBRA administration business.  We know these first-hand because we ourselves ran a large scale COBRA administration business before founding Benaissance.  Several of our customers have asked recently that we write these down so that they can use this discussion themselves in conversations with large prospective clients or broker/consultant partners.  So, while we know that by doing this we’ll be teaching some basic software vendors out there things they should have known 20 years ago before they wrote their first line of code, here they are:

1.       Client and Member Service/Support – Traditional COBRA administrators on traditional COBRA administration platforms rely upon large call centers to handle all client and member service and support.  Not only is this the most inefficient and expensive way to provide service and support, it is very difficult to scale effectively and usually only provides support to clients and members during business hours.  It also perpetuates the “black box” nature of most COBRA administration where employers “throw COBRA over the fence” to their COBRA administrator and then cross their fingers hoping the COBRA administrator does a good job.  Benaissance believes that the provision of COBRA service to employers is a trust relationship which requires a fully transparent operation. So, while our administrator customers certainly do and always will run a call center to take calls from clients and members, our customers also provide 24/7 access to COBRApoint for all of their employer clients and members through secure, dedicated web portals.  Our administrator customers believe in total transparency and total service, and they manifest this belief by providing all of their clients and members with immediate access to the data they need when they need it wherever they are.  The simplest example of this is the following.  When an administrator runs a traditional COBRA operation without dedicated secure portals for each client and member, 80% of the phone calls they take from Qualified Beneficiaries are simple calls asking, “Did you get my last payment?  When is my next payment due, and how much do I owe?” However, when an administrator provides a secure web portal for each member which provides this simple information, their call volume from Qualified Beneficiaries drops over 40%.

2.       Capturing Data – Employers need to notify their COBRA administrator each time one of their employees or an employee dependent experiences a Qualifying Event and (for most employers) each time they add a new hire/new enrollee.  Traditional COBRA administrators using the “black box” approach require that their employer clients complete paper forms which they fax to the administrator which the administrator then hand-keys into their COBRA system – a process which is fraught with manual error and which is highly inefficient.  Through COBRApoint, our administrator customers provide all of their employer clients 24/7 access to a dedicated secure client portal where the client may elect to enter new hires and new qualified beneficiaries through intuitive wizards with built-in validation or by file using our hierarchical CSV import specifications with detailed success/failure reports.

3.       Reporting Data – Employers need frequent reports on their COBRA population so that they can accurately reconcile their carrier bills.  Traditional COBRA administrators print and mail paper reports to their clients at the end of every month.  Not only is this an inefficient and expensive process, but the reports are out of date the day they are mailed.  Furthermore, in some states the governing state law makes this problematic as certain protected information cannot be included on reports which are sent through the mail.  Through COBRApoint, our administrator customers provide all of their employer clients 24/7 secure web based access to both historical date ranged based and real-time reports ensuring that their clients have access to the data they need when they need it and ensuring secure, encrypted delivery of all data.

4.       Mail Fulfillment – The regulations governing COBRA still require that the official communication regarding COBRA rights to COBRA Qualified Beneficiaries be performed by first class mail (or to be more precise, the regs specifically state that first-class mail is a legitimate communication method).  Given that the timing of sending mail has strict implications on key dates in an individual Qualified Beneficiary’s life under COBRA, this is a significant scale bottleneck for most COBRA administrators.  When mail is fulfilled in-house by a typical COBRA administrator, their ability to scale is severely restricted by their capacity to generate mail in a timely fashion.  Through our Benaissance Mail Services, our administrator customers employ a combination of an enterprise scale COBRA administration system (COBRApoint) and a partnership with a highly secure ISO 9001:2008 and SAS70 Type II reviewed print/mail vendor who generates one million pieces of first class mail a day to ensure that mail fulfillment is never a scale bottleneck for them.  While our administrator customers retain detailed audit capability and the required proof-of-mail reporting, mail fulfillment is an automated, hands-off process guaranteed to generate and mail all notices same day regardless of daily volume.

5.       Payment Processing – Another significant scale bottleneck for most COBRA administrators is their ability to accurately process large payment volumes in a timely fashion.  Most COBRA administrators today still only accept paper payments by mail from Qualified Beneficiaries, and the postmark date on the envelope is the determining factor of whether or not the payment was made on time.  Outsourcing payment processing to a traditional bank lockbox therefore is not an option due to the postmark date capture requirement and the desire that late payments not be cashed. So, most COBRA administrators process payments in-house by hand – a highly inefficient and error prone operation.  The difficulty in scaling this manual operation is exasperated by the fact that the vast majority of these individual personal checks come in during the last and first weeks of every month.  Through Benaissance Payment Services, our administrator customers provide three payment channel options for their Qualified Beneficiaries – paper payments by mail; online real-time electronic payments through the secure COBRApoint Member Portal by credit card, debit card, or one-time ACH; or scheduled/recurring ACH.  For paper payments Benaissance Payment Services employs a highly efficient process which scans every payment with its postmark date, runs it through COBRApoint, and electronically (securely) deposits only the timely payments into the administrator’s custodial cash account each day.  This combination of highly efficient, highly accurate payment options not only provides Qualified Beneficiaries with the most flexible payment options available, but also ensures accuracy, efficiency, and near limitless scale for our customers.

6.       Custodial Cash Management and Remittance – At the end of the day, when we strip away the COBRA specifics, all COBRA administration businesses are essentially single point individual billing, custodial cash management, and remittance businesses.  Note to every other COBRA administration system vendor – if you don’t understand this, and most of you don’t, you have no business being in this business.  Eligibility management & reporting and precise administration of the COBRA regulations are certainly key and core to the operation, but large volumes of custodial cash flow through large COBRA administrators, and it is essential that a COBRA administrator understands and manages this core facet of their business precisely.  The challenge to this is that custodial cash management business are by their very nature fluid.  Payments come in; they are allocated to premiums; remittance reports are run and checks cut;…and then things change.  Payments which were part of the remitted amount come back NSF; employers tell the administrator that they forgot to tell the administrator about a severance package for a Qualified Beneficiary three months ago; employers are late in giving their COBRA administrator their plan rates for the new plan year; Qualified Beneficiaries elect to decrease their coverage or increase it due to a life changing event; etc., etc., etc.  It is absolutely critical that a COBRA administrator employ a COBRA administration platform which provides precise tracking of all custodial cash and which utilizes a core payment allocation and remittance system which is posted and adjusted using the same accounting principles employed in a general ledger system.  Remittances (whether to employer or to carrier) must be formally “posted,” and then if anything changes which impacts a previously posted and remitted premium amount, these changes need to automatically be included as adjustments on the next remittance cycle.  All of this needs to be clearly reported to the client (and/or carrier if remitting to the carrier).  COBRApoint handles all of this seamlessly and with precise accuracy.  Again, even in the midst of all of the COBRA specific eligibility and liability issues, the single worst question a COBRA administrator could ever hear from a client is, “where did the money go?”

7.       COBRA Administration – This seems like a simple one, but one of the fundamental flaws plaguing many COBRA administrators today is the ineptitude of their antiquated COBRA systems.  Many of the commercially available COBRA administration systems on the market today still track first and last day of COBRA and status (i.e. pending, enrolled, terminated) by Qualified Beneficiary.  This is not accurate and makes it impossible for a COBRA administrator to accurately administer COBRA for an employer client who may sponsor more than one plan with different benefit termination types.  It is critical that COBRA be tracked by QB Insurance Type (i.e. Medical, Dental, Vision, etc.).   Furthermore, many COBRA administration systems on the market today still calculate the end of a Qualified Beneficiary’s payment grace period as the last day of a calendar month.  Since this is not accurate (the grace period should be precisely 30 days after the due date), many COBRA administrators intentionally “lie” to their COBRA systems when they receive a payment which they know is postmarked on time, but which they know their COBRA system will not accept.  As soon as an administrator begins lying to their COBRA system, there is no way they could ever accurately defend a law suit if necessary against a plaintiff attorney with any experience.  Finally, we all know that we’re living in a regulatory world today which is marked by legislative change, and there is no reason to expect that this is not going to happen again.  If the COBRA system an administrator is running is based on a “toy” database or on one which is no longer even supported, what are the odds that the system is a modern object oriented system which can be quickly and accurately updated to reflect legislative change.  Every employer should ask their COBRA administrator one simple question, “What database is your COBRA system running on?”  If you’ve never heard of the database you get as an answer, or if you thought it was long since retired, or if you think of it is a light-weight toy, you should be looking for a different COBRA administrator.

8.       Eligibility Management & Reporting – This is perhaps one of the least universal or consistent processes across multiple COBRA administrators, and it is impacted significantly by the insurance carriers.  Many COBRA administrators report eligibility data to carriers (or TPAs) on behalf of their clients, but some do not, and some do it for some clients but not for others.  Some prefer to send daily faxes of eligibility changes.  Some send eligibility change reports by encrypted email on varying frequencies.  Some send full file eligibility files to carriers daily, some do it weekly.  For many, they do all of these depending on the varying requirements of their clients and their clients’ carriers.  Oh, and some are forced to manually log into carrier websites as if they were the client and hand key in eligibility changes.  This is currently a mess, and a huge time suck for the good administrators who try to do it well.  The absolute kicker in all of this is that even when an administrator accurately reports every single eligibility change precisely and timely, sometimes the carrier doesn’t get their system on their end updated.  The only place to catch this is when the employer client sits down every month and reconciles their carrier bill (or their enrollment report from their TPA if they’re self-insured) against the reports they have from their COBRA administrator.  Sadly, this doesn’t happen as often or as frequently or as diligently as one might hope.  The result is that months after the COBRA administrator terminates a QB for non-payment and reports this to the carrier, the employer suddenly realizes they’ve been paying the carrier all along since the carrier didn’t enter the termination on their end, and now the employer wants their money back, but the carrier won’t give it back.  So…the employer thinks the COBRA administrator should pay.  How is this even close to being fair when the only player in the whole system who did their job (the administrator) is expected to pay for the errors of the other two players?   There is not yet a perfect solution to this mess.  Congress tried to help by mandating a universal standard for electronically reporting enrollment and disenrollment to carriers under HIPAA (the 834 file specifications).  The “standard” is maintained and published  by the Washington Publishing Company (http://www.wpc-edi.com/), but just about every carrier publishes their own Companion Guide where they detail how the files they will accept differ from the “standard.”  To top it all off, many carriers will only accept 834 files for certain employers, but not for others.  Again, this is all a great big mess for administrators who are stuck in the middle.  COBRApoint does everything it can to help.  At the administrator’s option, COBRApoint will produce nightly eligibility change reports formatted for faxing or emailing; nightly eligibility reports in normalized database tables for integration with other systems; date range based eligibility change reports in many different file formats which can be retrieved by the administrator and/or their client(s); and last but certainly not least, full file eligibility files in the WPC 834 XML “standard” which administrators can map to carrier specific 834 EDI files using each carrier’s Companion Guide.  Hopefully one day the “standard” will in fact be a “standard.”  In the meantime, employers need to reconcile their carrier bills.

Open enrollment season is upon us.  And Kiplinger is putting it in focus with some timely ideas and suggestions for 2010. 

http://www.kiplinger.com/columns/ask/archive/2009/q1013.htm

Pete’s Pumpkin Patch has outsourced their COBRA to Xcellent Benefit Administrators (XBA) for the last four years.  By all accounts it has been an ‘excellent’ relationship for Pete’s Pumpkin Patch and their HR Manager, Lori Wright. 

On December 12th, Jessica Whimple terminated employment with Pete’s Pumpkin Patch.  Lori Wright logged into XBA’s Client Portal and entered Jessica’s qualifying event information.  XBA then promptly sent Jessica her COBRA specific rights election notice which communicated, among other things, the following information:
- First Day of COBRA - January 1st
- Medical - Family coverage - $600 per month
- Dental - Family coverage - $150 per month
Jessica elected to continue all benefits at current coverage levels and made her first three months of premium payments. 

Jessica’s April premium payment was received by XBA on April 20th for $600 with no accompanying information about why her payment was less than the total amount due. 

XBA’s COBRA software system allows for ‘cherry picking’ of premium payments across different insurance plans (also known as ‘manual allocation of payments to premiums’).  Because of this functionality, XBA made the decision to apply the full $600 towards the dental premium for April, May, June and July.  On May 1st, XBA COBRA system terminated the medical plan for Jessica and sent a termination of COBRA rights to her medical carrier.

The Problem
Regardless of the decision made by XBA on how to apply Jessica’s April premium payment, they would ultimately be ‘guessing’.  For example, XBA could have applied the $600 for one month of medical or for four months of dental insurance.  Also, Jessica may have forgotten to include a note indicating that she intended to drop her spouse from the medical plan or drop family coverage for the dental.  The number of possible permutations is almost limitless and it is not up to XBA to ‘guess’ on how to apply Jessica’s premium payment. 

Regardless of the decision made by XBA on ‘cherry picking’ payments, we can safely assume they would be immediately wrong.  How in the world could XBA interpret the intentions of Jessica Whimple?

The Better Solution
XBA should accept the $600 and post it to her record.  The COBRA system used by XBA should record the partial payment, apply any insignificant premium payment calculations, and send the appropriate letter informing Jessica of her short payment.  If Jessica fails to pay the full $750 by the end of the April grace period, her COBRA rights for all plans should be terminated.  This is the safest course of action for XBA and Pete’s Pumpkin Patch since Jessica was silent on her exact intentions. 

We know of some administrators who would take it upon themselves to ‘reach out’ to Jessica and inquire about how to apply the premium.  It seems to us that this action could make sense if XBA’s enrolled COBRA population was small AND XBA had a current telephone number for Jessica AND could make contact with her before the end of the April grace period.  However, the overhead associated with this process is substantial and opens XBA to added exposure.  What happens if XBA forgets to make the call?  What if XBA does not have a working phone number or is unable to contact Jessica before the end of her grace period?  The burden to determine how to apply the premium payment unnecessarily shifted from the Qualified Beneficiary to XBA.

Administrators must always watch out for activities that create an ever-expanding liability circle.  For example, sending a ‘return receipt required’ letter to a Qualified Beneficiary widens the liability circle.  If the ‘return receipt required’ document is returned unsigned, the administrator now has proof the letter was not received and must act upon this knowledge.  If the administrator had simply sent a letter first class with proof of mail, the liability circle would not have been widened.  The same logic applies to ‘cherry picking’ premium payments.  By making arbitrary decisions on behalf of the Qualified Beneficiary will expand your liability circle and open the company up to unnecessary risk exposure.  

The society pages have been buzzing for months about of the infamous divorce involving Kozmo Kramer and Kizzie Kramer.  Kozmo Kramer is the celebrity CEO of Vandalay Industries and Kizzie is society maven of the Upper East Side.   The divorce has been filed and is known now as Kramer v. Kramer.
 
Some months before the news of Kramer v. Kramer hit the stands, Kozmo instructed Vandalay’s Benefits Manager to cancel coverage on Kizzie effective immediately.  The Benefits Manager dutifully complied with the Mr. Kramer’s request and submitted the forms to Vandalay’s insurance carriers to disenroll Kizzie Kramer from benefits.
 
Enter the high-powered legal team retained by Kizzie Kramer.  In planning the strategy for obtaining the house in Martha’s Vineyard and 50% of all assets, the lead attorney representing Kizzie contacts Vandalay’s Benefit Manager to obtain COBRA information.
 
Confidently, Vandalay’s Benefit Manager recites the section of the COBRA regulations that states a person must have had coverage the day before the qualifying event to be eligible for COBRA continuation rights.  The Benefits Manager goes on to say that since Kizzie’s coverage was canceled several months prior; Vandalay is not required to provide COBRA continuation rights to Kizzie Kramer.
 
Is Kizzie eligible for COBRA?  And if so, when is the start of COBRA period and when was her qualifying event?

The final regulations published in 1999 addressed this exact situation.  If a person’s coverage is reduced or eliminated in anticipation of a qualifying event, then the reduction or elimination is disregarded in determining whether or not the qualifying event triggered a subsequent loss of coverage.  In the above divorce, the loss of coverage preceded the qualifying event.  Since it is plausible that Kozmo Kramer canceled coverage on Kizzie in anticipation of their divorce, Kizzie is still eligible for COBRA continuation rights.  Vandalay Industries will need to issue a COBRA specific rights letter to Kizzie at their very first opportunity.  Kizzie’s coverage under COBRA would commence as of the date of the divorce being finalized.
 
A complicating factor is a divorce usually takes a long time for finalize (i.e. longer than 6 months).  HIPAA states that if there is a significant break in coverage lasting longer than 62 days, the individual loses portability protections with regard to pre-existing condition limitations.   Kizzie has endured a significant break in coverage and this is something her attorney’s will investigate at length.  Additionally, an employer may change carriers or insurance carriers may not be willing or able to reinstate coverage for the qualified beneficiary who’s experienced a coverage loss in anticipation of a qualifying event.  This situation places the employer and the plan at significant risk because of notice penalties and uninsured claims associated with the loss of coverage in anticipation of a qualifying event.  Finally, plans that have an annual open-enrollment period are also at risk because employees are free to add or drop dependents and amend benefit enrollments at will. 
 
What Can Be Done?
Employers will need to first discuss their policies and procedures with an experienced labor attorney to ensure adequate safeguards are in place to prevent an employee form terminating coverage in anticipation of a qualifying event.
 
Also, the employer should be sending a HIPAA certificate to the attention of the individual whose coverage has been canceled.  The HIPAA certificate should be sent with proper documentation so the employer can provide positive proof of compliance.  Finally, if there is any indication that an employee is terminating coverage in anticipation of a qualifying event, the employer should send a COBRA specific rights letter and election form to the affected individual.  If at a later date it is determined that no qualifying event occurred, then the employer must issue a notice of unavailability for COBRA, as required by the May 2004 final regulations.

Advisory opinions can be useful tools for employers and administrators.  The attached 1996 Advisory Opinion clarifies that Minnesota cannot impose regulations on employers that violate the preemption enjoyed by COBRA.  There are a whole host of states who have laws on the books that attempt to extend, expand and revise federal COBRA regulations. 

1996DOL_AdvisoryOptionERISAPreemption.pdf (328.24 kb)

Joey plays the loveable Dr. Vic Torie for the soap opera series, Days of Wine and Roses.  Late last week, in episode 518, Dr. Torie was killed in a terrible smelting accident. Needless to say, Joey was out of work.

While Joey worked for the Studio, he was covered under the group medical plan. His termination of employment was a qualifying event under COBRA, so the Studio's Human Resources Department sent a COBRA election letter. Joey enrolled and paid the proper premium for his first three months of COBRA coverage. Unfortunately, Joey was never very good with details. In his fourth month on COBRA, his premium was $298.19. Joey mailed a check for $289.91. Should Joey be allowed to continue on COBRA? What additional action, if any, should the Studio take?

How Much is Enough?

Prior to 2001, employers and administrators were up to their own discretion when determining how to handle COBRA premium underpayments. It was common for COBRA continuation coverage to be terminated due to an under payment by as little as a penny.

Thanks to the Final Regulations released in January of 2001, we have a rule to follow. Administrators are able to terminate COBRA continuation rights provided the premium payment is considered significantly less than the total amount due. That then begs the question, what is a significant underpayment?

The IRS defines this for us as the 'Insignificant Underpayment Rule". Basically, if a premium payment is short by no more than the lesser of $50.00 or 10% of the total required amount, it is an insignificant underpayment. In situations where the underpayment is insignificant, the administrator has two choices, (a) accept the payment as payment in full; or (b) grant the QB an additional grace period of 30 days to remit the balance due.

The administrator must perform a calculation to determine if the payment is insignificant and thus eligible for the additional grace period. Let's take a look at Joey's situation and determine if his math error is significant or not:

1.  Determine 10% of the Premium: In this case, 10% of $298.19 is $29.82
2.  Use the lesser of 10% or $50 as the safe harbor: In this case, use $29.82
3.  Determine the shortage: $298.19 - $289.91 = $8.28
4.  If the shortage (#3) is less than the safe harbor (#2), the shortage is insignificant

Clearly, Joey's premium payment is considered insignificant by the IRS. The best way for an employer or administrator to deal with this shortfall is to send notice and begin a safe harbor grace period of 30 days for the shortfall to be made up. Administrators will find that requiring the necessary premium and tracking the additional timeline will significantly reduce the total number of COBRA continuants. Because COBRA continuants cost a plan an average of 156% of active employees, savings to the plan often eclipse the additional administrative time and expense.

Mandy Pepperidge is HR Manager for DePasto Tool & Die, Inc., a growing 80 employee specialty manufacturing company located in Faber, OH.  Over the years, Mandy has come to rely heavily on her benefits broker, Doug Neidermeyer of Neidermeyer and Wormer Insurance.  Attention to detail and superior service are hallmarks of Neidermeyer and Wormer Insurance and wrapping up their client’s annual benefits review and renewals well in advance of the new plan year is key to this reputation. 

Due to a couple of illnesses at both DePasto and Doug’s office, this year’s renewal slated for June 1st was not communicated to their COBRA administrator until July 31st.  On August 1st, DePasto’s COBRA administrator keyed in the new rates effective June 1st and notified all QBs of the rate change.

To complicate matters, DePasto had three enrolled QBs each having paid as billed for June’s coverage.  All three enrolled QBs were quite surprised to learn of DePasto’s change in premiums occurring two months in the past.  Since the COBRA administrator inputted rates effective June 1st on August 3rd, all three COBRA participants were terminated.  The COBRA administrator’s software accepted the retroactive change, determined the grace period for June and terminated each since the June’s grace period expired on July 1st.  Finally, the insurance carrier was notified of each QBs’ termination of COBRA rights.

The next call DePasto received was from the DOL’s Employee Benefit Security Administration office stating an investigation and audit of DePasto’s COBRA procedures is underway.  The EBSA faxed to Mandy copies of rate change letters from the COBRA Administrator dated August 1st indicating a change in rates effective June 1st.

Is Mandy and her COBRA administrator following COBRA regulations as they pertain to informing Qualified Beneficiaries of premium rate changes?

COBRA regulations require that Qualified Beneficiaries receive at least a 30 day advance notice of any rate changes.  To have properly complied with the advance notice requirements under COBRA, Mandy and her COBRA administrator should have communicate to her QBs the change in premiums on or before May 1st.  Since this was not possible, what should DePasto have done differently?

This is a very common problem and one COBRA administrators and employers must understand to manage properly.    First, DePasto’s COBRA administrator should have accepted the June premium rates, input these rates into their COBRA software system effective June 1st in order to preserve DePasto’s premium rate determination period, but not billed them to the pending and enrolled QBs on record till September 1st.  Second, all new QBs input into the COBRA administrator’s system after August 1st, but with qualifying event dates before August 1st, should have the new rates communicated on their COBRA election notices.  The EBSA would have not been contacted since all pending and enrolled QBs on record as of the date of the new rates input into the COBRA system would have been afforded a full 30 days advance notice. 

Furthermore, since DePasto did not properly follow the advance notice of premium change requirement, they may be looking at the prospect of self-insuring these three QBs medical claims till the end of their COBRA continuation period.  The carrier is under no obligation to reinstate coverage due to the error created by DePasto and their COBRA administrator.   Remember, COBRA is an employer law, not an insurance law.

On July 1^st, ACME Company successfully switched major medical carriers with the help of their new insurance broker.  275 active employees and their families attended open enrollment meetings, completed the health applications and received insurance ID cards and Summary Plan Description booklets.  Everybody was happy with the new premiums, coverage and services.  That is except Lisa Smith.   

Lisa is a currently enrolled qualified beneficiary under COBRA through ACME Company.  She left ACME Company after exhausting her FMLA back in November of the prior year.  Lisa had been paying her monthly COBRA premiums to ACME’s old carrier.  Currently, Lisa is receiving regular dialysis at the hospital and is on the waiting list for a kidney transplant.  Lisa is also considered disabled through Social Security Administration and is entitled to up to 29 months of COBRA. 

The change in insurance carriers came as a complete surprise to Lisa.  She first learned about the change in health carriers when her most recent dialysis treatment was denied by her ‘old’ carrier.  Frantically, she called ACME’s HR department to inquire about how their insurance carrier could have denied her claim.  This was the very first time anybody at ACME thought about the COBRA participants and how their change in carriers affected these people.  After a lengthy conversation with HR, Lisa told ACME she was going to retain an attorney to protect her COBRA rights and will be filing a complaint with the Department of Labor’s EBSA office. 

The news of Lisa’s condition came as a complete surprise to ACME’s new insurance carrier as well.  Insurance carriers typically require a full census of eligible insured participants (including qualified beneficiaries) before the issuance of final rates.  Since the full census failed to include qualified beneficiaries, the insurance carrier and broker are in a tough spot.  The carrier can cancel the policy, dramatically increase final rates or deny insuring all Qualified Beneficiaries, including Lisa.  Remember, COBRA is an employer law, not an insurance law.  Meanwhile, Lisa’s claims are being denied by both carriers since ACME canceled the old policy and never enrolled her on the new policy.  The urgency of this situation increases almost by the hour.  Lisa needs dialysis to stay alive and remain a viable candidate for a kidney transplant.  Continued insurance coverage is paramount to saving her life. 

As the above story depicts, there have been several significant errors made by both ACME Company and their new insurance broker.  Some of the errors have easy solutions and some cannot be fixed so easily.  This whole situation could have been avoided had ACME and their new insurance broker understood the COBRA regulations better.  

A central tenet of COBRA is the qualified beneficiary must be treated the same as a similarly situated active employee.  This is the most important thing to remember when planning for the annual benefit review and open enrollment meetings.   During open enrollment, the employer must extend to each qualified beneficiary the same information and enrollment options as are being communicated to the active plan members.  Among other things, each qualified beneficiary can add, remove, or change their enrollment status as well as benefit elections.  If the employer is sponsoring a new benefit, each qualified beneficiary must be given the same opportunity to enroll under the new benefit plan.  Special limitations exist for certain Section 125 flexible spending accounts.   

Finally, if the employer is changing carriers and/or administrators, each qualified beneficiary must receive the required enrollment information to make an informed decision about benefit coverage levels, premiums, and network availability.  Notice of premium changes must be communicated at least 30 days before the effective date of the rate change.

Managing the Open Enrollment Process

To ensure a smooth and uneventful open enrollment process, the employer should include every active qualified beneficiary on the census of insured individuals.  To help the insurance carrier accurately price their proposal or renewal offer, it would be advisable to include additional information about the qualifying event, time remaining to elect and time remaining under COBRA, if enrolled. 

The employer needs to ensure the enrollment process moves forward and that each qualified beneficiary is granted enough time to enroll or de-enroll under benefits.  Planning the open enrollment meetings, drafting the enrollment paperwork, and establishing deadlines for responses will help prevent the qualified beneficiary from holding the plan “hostage” and delaying the release of final renewal premiums or rates.

Final Thoughts