COBRA Procedures and Basic Compliance Rules for Employers
Contents
1. Regular Processing General N otices e Once a month e Your deadline is 90 days from enrollment on a COBRA plan e Establish an internal process wherein you are notified of any new active plan enrollments This includes an employee and covered spouse If a spouse is added later you will need to be notified of their addition so you can issue them the G eneral Notice E lection N otices terminations reduction in hours and death of employee e Once a month minimum e Asan employer administrator your deadline is 44 days from the date coverage is lost due to termination or reduction in hours e Establish an internal process wherein you are notified of any losses of coverage due to a qualifying event Election N otices divorce legal separation and loss of dependent status e Upon timely notification of a qualifying event from the employee or dependent losing coverage you have 14 days to issue the notice e Sometimes you will be notified of a loss of dependent status usually age from a carrier Upon that notification you may need to check for loss of coverage under another carrier s plan as not all carriers will notify you Maximum Continuation N otices e Once amonth Use the Reminder Report as a trigger e There isn t a fixed timeline but these should go out at least 60 days in advance of COBRA expiration Payment Posting e Once a week if there are payments to be posted Late Premium Waring Letter optional e Around the 202. Issue an Election Notice Within the 44 or 14 day deadline create COBRA Qualifying Event the Election Notice and mail to the qualified beneficiaries at their last known mailing address using proper mailing procedure that requires the name of the PQB and if any the spouse on the envelope A recent court case suggests that USPS Certificate of Mailing be used to create firm proof of mailing An employee spouse or You need to provide an Unavailability of CO BRA notice within 14 dependent provides notice of business days using proper mailing procedure There is a template divorce legal separation or available in Help on the Solo menu bar loss of dependent status but If you are a COBRA TPA this notice will be issued by the is not entitled to COBRA employer Receive a COBRA Election and the Initial Premium COBRA requires that an Election be made within 60 days from the date of RECEIPT of the notice The initial premium is due 45 days from the date of election Both elections and premiums are considered made on the day the form is sent A verbal election should be treated as an election as long as the form is received within a specified deadline When premium is received reinstate coverage retroactively for the months for which payment was made Action by Plan Administrator V After timely receipt of the signed Election Form change Response Result in PQB Status to Elected or if the initial premium is not rec
3. of the month Use the Reminder Report as a trigger Prior to issuing the letters you should make sure all payments are posted Open Enrollment once a year COBRA participants have the same rights at open enrollment as active employees You will need to send them a packet and upon receipt of their new elections if any you will update their elections and send them a rate change type confirmation letter and new payment instructions If they don t make a change you still need to update their elections for any new rates and send them a confirmation type letter Processing T riggered by Receipt of a N otification New Election Processing e Upon receipt of a signed Election Form you should process promptly There isn t a deadline Early Termination N otice other than non payment e Upon receipt of a notification of termination you will process the termination and send out a letter Always get your termination notifications in writing Early Termination N otice non payment e After the COBRA month closes and about a week passes to allow for mail time you will process the termination and issue a letter Changes in Plan Enrollment e Upon receipt of a request to change plans or enrollment you should process promptly e You will send out a confirmation type letter from Elections along with new Payment Instructions Second Qualifying Events and Disability Extensions e Upon receipt of the notification from the COBRA participant or t
4. Early Termination of COBRA notification is always required Voluntary termination Due to independent rights to elect CO BRA each family member can terminate CO BRA independent of any other family member Premium not paid on time Premiums are paid on the date sent Typically measured by a postmark Remember the insignificant premium shortfall rule Medicare entitlement after the date of the CO BRA election Other group coverage After COBRA election the qualified beneficiary becomes covered by another group health plan If the new plan has pre existing limitations or exclusions that apply to the qualified beneficiary COBRA can be terminated only after the limitation or exclusion is satisfied Plan is discontinued Employer ceases to maintain any group health plan No Longer Disabled If the disabled qualified beneficiary is no longer disabled then coverage ceases for all qualified beneficiaries They are required to notify you within 30 days For cause CO BRA participant violates some contractual provision in a health plan that would cause termination for non CO BRA beneficiaries e g fraudulent submission of claims Action by Plan Administrator v COBRA expirations The Reminder Reports indicate CO BRA expirations at 90 days Issue a Maximum Continuation Notice from Letters on the menu bar In Termination enter the date and reason Be sure to comply with any State regulations as they apply to Federal CO BRA The Maximum Continuat
5. Process Gennin ennta aiani ai not error fee tre rt Dro eivai Processing Triggered by Receipt of a Notification cssssssesssssssssssssesssssscsscssssssssessecsscsscsssssessessecascsssssssssessenes NEWLY ENROLLED EMPLOYEES AND SPO USES ien etcetera eet t c a ee cn dh cde ISSUE THE GE NERAU NOTICE wien tcoud nn e oec ped ebeaste e EN EU LEOS o pU LAN pa eC e dese RECEIVE NOTICE OF AN INITIAL QUALIFYING EVENT avai tae Oe e t ISSUE THE EEBCTIONSNQTIOR 6 d stestetercn itd Rte EM hee tboE Om EE Repo EM eben eE RECEIVE A COBRA ELECTION AND THE INITIAL PREMIUM RECEIVE AND ADMINISTER COBRA PREMIUMS Ls da Lets aec eie haare ca sere Rare cba RECEIVE NOTICE OF A SECOND QUALIFYING EVENT 4r retkiaae ob reta ob e beats RECEIVE NOTICE OF DISABILITY FROM THE SSA uasna eiat ese teM qnotalsteveeta ld qne re Eat OPEN ENROLLMENT OR CHANGE IN COBRA RATES Henn TERMINATION OF COBRA 5iiucchs edd tu ipete kai bt poteet acd tan areas mr M as re ES ol aie RECEIVE A CHANGE IN STATUS NOTICE ud nocte aeree e de e e D Ge HERO da OPEN ENROLLMENT AND COBRA 5 etsi on e au inh M IR M ol tendo REOR PRO Processing Timelines The following is a brief outline of how you might structure your processing timelines and activities during a month and throughout the year For more specific information refer to the following pages Tip You should open Solo at least monthly in order to view the Reminder Reports I would recommend between the 1st and the 10 of each month
6. the disabled qualified beneficiary is part of the coverage group Contact your insurance carrier s for information on their policy This is an extension of COBRA coverage and the monthly premium must be timely made within the grace period The initial premium payment rules do not apply Note All qualified beneficiaries in the unit have an independent right to elect the extension The disabled qualified beneficiary does NOT have to participate Issuing a Notice of Unavailability of COBRA Coverage If the notification is not timely the disability timelines not met or if the qualified beneficiaries do not meet the conditions of the notification rules outlined on the form or in the Election Notice you will issue Notice of Unavailability of COBRA Coverage within 14 business days Start by going to Letters on the main menu bar and clicking on Notice of Unavailability of COBRA Coverage and follow the process Make a copy of the notice for your files Make a note in the notepad Action by Plan Administrator v Before starting the process contact your carrier s to confirm their policy for COBRA rates for SS Disabilities If necessary set up the Social Security D isability Plans in Setup and review the template in the Solo Notice Editor and make any necessary edits to the text v Upon receipt of SS Determination Letter go to the COBRA qualifying event function box and check the Disability Tracking in Effect box at the bottom and follow the sequence o
7. update the COBRA rates in Setup Then for each family unit on COBRA update their plan selections for the forthcoming year based on their current year s election Print a Rate Change letter that can be included with the packet When their elections are returned update the plan elections and issue a Plan Change or Enrollment Change letter whichever is appropriate that automatically includes a N otice of Second Qualifying Event Disability or Change in Status Issue new Payment Instructions or Coupons Notify the insurance carrier s of any changes Pending enrollment status If you have COBRA qualifiers in a pending enrollment status who may be affected by this rate change it is advisable to notify them of the rate change You do not need to issue a new Election Notice Y ou can send them the new COBRA rate matrix with a cover letter 11 Termination of COBRA A Expiration of COBRA notification is required under certain circumstances If CO BRA is terminating due to the expiration of the continuation period then a notice must be mailed to the PQB and if any a covered spouse in the six months period prior to the expiration if other coverage such as conversion coverage is available We recommend that this notice be issued in all circumstances as it s a good business practice and avoids misunderstandings Use the Maximum Continuation Notice found in Letters on the menu bar It can be edited in the Solo Template E ditor B V
8. COBRA Procedures and Basic Compliance Rules for Employers Caution COBRA TPAs must use discretion in using these suggested procedures as their deadlines and processes may be different The following pages outline frequently performed administrative procedures and commonly accepted practices for routine CO BRA administration using the Soloe CO BRA management program They should be used in combination with other resource material available to you These procedures do not include procedures for other regulations such as the federal ARRA subsidy program We encourage you to review these procedures for accuracy and compliance with the Regulations make any necessary changes to fit your particular practices and those of your insurance carriers and adopt the final procedures as your company s practices Due to the complexity of COBRA the necessity for making a judgment in the face of a particular compliance issue and the possibility of changes to the Regulations or re interpretation of the Regulations by the IRS or the courts we cannot guarantee that these procedures will assure your compliance with COBRA You are the Plan Administrator and have full responsibility for COBRA compliance If these reference materials do not provide adequate guidance please contact an attorney The Affordable Solutions Team services affordablesolutions com July 2010 Table of Contents PROCESSING TIMBEINES e desereret iet ie RS PLU Vl RE Co YR bae odes Regular
9. RA requires an extension to 36 months if during the original 18 month or the 11 month extension due to disability period a qualified beneficiary loses coverage due to the following qualifying events Divorce Legal Separation D eath of the Employee Ex employee s Medicare Entitlement or Loss of Dependent Status They must notify you within 60 days of the qualifying event and then you must provide notice within 14 days This is typically not a second qualifying event for a spouse or child per a 2004 IRS ruling Issuing a N otice of Unavailability of CO BRA Coverage If the notification is not timely or if the qualified beneficiaries do not meet the conditions of the notification rules outlined on the form or in the Election Notice you will issue the Notice of Unavailability of COBRA Coverage within 14 business days Start by going to Letters on the main menu bar and clicking on Notice of Unavailability of COBRA Coverage and follow the process Make a copy of the notice for your files Make a note in the notepad Premium due date Even though the payee may have changed the premium is due within the Grace period The initial premium payment rules do not apply to an extension Action by Plan Administrator v Upon timely receipt of notice of second qualifying event go to Family Status and initiate the Second QE procedure for the affected qualified beneficiary by clicking on the 2nd QE button This process will give the affected family me
10. eived Elected Awaiting Premium until the premium is received In PQB Status enter the date the Election Form is received and if applicable the date the initial premium is received Record benefit elections in Elections Issue the appropriate Confirmation Letter from Letters in Elections The Notice of Second Qualifying Event Disability or Change in Status is automaticaly included with all confirmation type letters Issue Payment Instructions or Coupons from that function box When premium is received record receipt of the initial premium in Premiums Once the initial premium is received notify insurance carriers of coverage reinstatement Initial premium is not made within the 45 day deadline Change Response Result in PQB Status to Missed D eadline You can issue a letter from PQB Status Return any premiums received with a letter of explanation You can use the Custom Letter feature Receive and Administer COBRA Premiums COBRA requires that Qualified Beneficiaries have a minimum 30 day Grace period from the beginning of the billing period for payment of premiums Typically the billing period starts on the first of a month COBRA premiums can be paid monthly or in advance and can consist of multiple payments YOU CANNOT REQUIRE PAYMENT IN ADVANCE OF EITHER THE DUE DATE OR THE END OF THE GRACE PERIOD Dueto the inherent lag in receipt of COBRA payments you may find it necessary to pay the COBRA premiums for the qualified be
11. f requested information The software will assist you in determining if the deadlines are met v At the appropriate time design a new Election Notice and mail using proper mailing procedures v If the disability extension is accepted by any of the qualified beneficiaries you will change the status in PQB Status enter the final plan Election s and issue a Plan Change or Enrollment Change letter that automatically includes a N otice of Second Qualifying Event Disability or Change in Status v Issue Payment Instructions or Coupons v Notify the insurance carrier of the extension 10 Open Enrollment or Change in CO BRA Rates You are required to provide advance notice of a change in COBRA rates And with only a few exceptions COBRA rates must remain in effect for the 12 month determination period that typically coincides with your insurance plan year If you cannot provide advance notice you may need to subsidize any rate increase until advance notice can be provided In addition COBRA enrollees have the same rights as active employees at open enrollment to change plans add or drop dependents etc Action by the Plan Administrator V V V Prepare an open enrollment packet for those enrolled on CO BRA The rate sheet may differ from that of active employees due to your CO BRA rate structure the 296 allowable load or the 150 allowable load for SSA disability extension Include a Rate Change letter in the packet You will
12. heir representative you should process the new notice 21d QE or confirmation of receipt letter SSA disability within 14 days e Both processes have some ins and outs and can vary depending on the circumstances Don t hesitate to ask for assistance Newly Enrolled Employees and Spouses Issue the General N otice Formerly the Initial CO BRA Rights Notice COBRA requires that the Plan provide notice of COBRA rights and obligations to covered employees and covered spouses within 90 days of the active coverage effective date If coverage for a spouse is added after the employee s the spouse must be provided a notice at that time It is critical that the notice be provided in a manner calculated to reach a covered spouse Therefore mailing the notice to the home is the most prudent method of delivery Action by Plan Administrator N otified that an employee and if any a Issue the General Notice and Notice of QE by spouse is newly covered adding the employee and a spouse if any as Active and within 90 days of coverage print the notice and mail to employee and if any the spouse at their home Both names need to be on the Notice and on the envelope When a spouse is being added as a Issue the spouse a G eneral Notice Add the spouse dependent to the employee s record Print Notice and envelope and mail to spouse at their home Substantive change in COBRA Print Notices and mail to all covered employees regula
13. ion Letter can be edited in the Solo Template E ditor v Early termination If the full family is terminating in the Termination function box enter the date and reason and issue a Letter as appropriate If a dependent is terminating enter the Date COBRA Coverage Ends date in Family Data and from Letters issue the D ependent Termination letter The Termination Letter can be edited in the Solo Template E ditor v Notify insurance carriers of the termination 12 Receive a Change in Status N otice If you receive a Notice of Second Qualifying Event Disability or Change in Status from an enrolled COBRA qualifier and you need to inform of a penalty for being outside the notification deadline or other requirements detailed on the form and in the Election Notice you will use the Notice of Unavailability of COBRA Coverage letter Start by going to Letters and the Unavailability of CO BRA Coverage letter and following the instructions Open Enrollment and COBRA COBRA enrollees have the same rights as active employees at open enrollment to add drop coverage add drop dependents etc You must send them an open enrollment packet If you need assistance with an open enrollment cover letter please let us know 13
14. mber qualified beneficiary the status of a PQB and their data will be under their own record v Design the Election Notice and mail the 2 Qualifying Event Election Notification using proper mailing procedure v Upon receipt of a signed form and or the premium in PQB Status change the Response Result from Pending Enrollment to Elected or Elected A waiting Premium v Enterthe final plan s in Elections and issue a Confirmation Letter that automatically includes aNotice of Second Qualifying Event Disability or Change in Status v Issue Payment Instructions or Coupons v Record premiums as they are received v Notify the insurance carriers of the extension v Modify the record of the ex employee PQB This will include changing their plan election s to correctly reflect their new coverage status i e employee only or employee and children etc Refer to the User s Manual Receive N otice of Disability from the SSA Extension to 29 Months A disability extension of 11 months can occur if any qualified beneficiary in the family unit is disabled as determined by the Social Security Administration SSA at any time during the first 60 days of COBRA and all notification requirements are fulfilled within the 18 month continuation period The rules are detailed somewhat complicated and are outlined in the notices and your CCH Manual Premium may be increased to 15096 of the applicable active plan premium during the extension as long as
15. neficiaries and consider their payment as reimbursement Partial payments if the payment received is insignificantly less than the amount due the qualified beneficiary must be given at least 30 days to make up the difference after notification by you The regulations stipulate that premiums paid that are 1096 or 50 00 whichever is less of what is due are insignificantly less than the amount due Alternatively you can accept the insignificant payment as payment in full Action by Plan Administrator v Verify that payment is made within the grace period Premiums are considered made on the date sent Use the postmark if available v Record the payment in Premiums v Ifapartial payment is made within the insignificant threshold record and allocate premium create the Partial Payment Letter and mail using proper mailing procedure Using the Partial Payment Report monitor receipt of the balance v If it is your stated policy you can issue a Late Payment Letter prior to the end of the grace period The Reminder Reports will indicate who has Unpaid Premiums v Iftermination occurs due to non payment enter the Termination Date select the Reason and issue the appropriate letter in the Termination function box v Notify the insurance carrier that CO BRA coverage has terminated Receive N otice of a Second Qualifying Event Extension to 36 Months This extension applies to family members on COBRA who are qualified beneficiaries COB
16. tions or regulatory guidance that and if any covered spouses using proper mailing prompts a re issuance of the notice procedure Receive N otice of an Initial Qualifying Event Issue the Election N otice Termination loss of hours death of employee or employee entitlement to Medicare the Employer has 30 days to notify the Plan Administrator and the Plan Administrator has 14 days to issue the Notice If the employer is also the Plan Administrator as defined by ERISA then the Plan Administrator has a total of 44 days to issue the Election Notice An employee s entitlement to Medicare does not typically trigger a qualifying event for a spouse or child Divorce legal separation or loss of dependent status an employee or qualified beneficiary has 60 days to provide notification of a qualifying event and the Plan Administrator has 14 days to issue the Notice A legal separation does not typically trigger a qualifying event for a spouse of other dependents Y ou will need to request proof that coverage will be lost Before issuing the N otice v Verify coverage was in effect the day before the qualifying event and that it will be lost v If notice is required from the employee or qualified beneficiary verify that it is within the 60 day notice requirement v And finally don t forget to notify the insurance carrier s that coverage is terminated Action by Plan Administrator Receive timely notice of a
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