The Consolidated Omnibus Budget Reconciliation Act (COBRA) can be confusing and can cost independent grocers more than $300 per day in penalties if not administered correctly. If you employ 20 or more employees and offer a group health plan, COBRA requires you to provide former employees and dependents with the opportunity to continue group health insurance coverage for a designated time.
The independent grocers we work with often face these three common pitfalls when administering COBRA:
- Not understanding when to offer COBRA
- Failing to provide accurate and timely COBRA election notices
- Improperly setting COBRA premiums
Read on to see how you can avoid these COBRA administration hazards.
No. 1: Not understanding when to offer COBRA
Employers are often confused about when to offer COBRA (the qualifying event), who is entitled to coverage and how long they are eligible for the benefit. COBRA requirements are triggered when a qualifying event occurs that ends the employee, spouse or dependent group health insurance coverage. The length of time an employer must offer extended coverage can vary based on the qualifying event and disability status.
Click here to see a chart outlining COBRA’s seven qualifying events, who is entitled to coverage and the length of coverage required.
No. 2: Failing to send an accurate and timely COBRA election notice
The complex COBRA process often requires the employer to send a variety of notices. Complying with the COBRA election notice requirements challenges many independent grocers. Here’s an overview of how it works:
- Employer notifies the group health plan of the qualifying event
- The plan must send a COBRA election notice to the individuals entitled to coverage (employee, spouse, dependents)
- Must be provided within 14 days of when the group health plan receives notification of a qualifying event
- The notices describe the recipients’ rights under COBRA, such as how to enroll in COBRA and payment requirements
- The employer is held responsible if the group health plan does not send the required COBRA election notices
Accurately providing information in the COBRA election notice can trip up even the most diligent employer. We suggest adhering to the Department of Labors’ model COBRA election notice to ensure you include the required information. The DOL (Department of Labor) deems use of its model election notice as good faith.
No. 3: Improperly setting COBRA premiums
Many employers mistakenly believe they must continue their employer contribution for the group health plan for COBRA participants. They are often surprised to learn that whether to charge and how much to charge COBRA participants is at the discretion of the employer. But, it is very important that employers follow the law when setting COBRA premiums and payment requirements including:
- The premium charged cannot exceed 102 percent of the cost of coverage.
- The premium charged must remain consistent for each 12-month premium period unless there is an increase in the plan premiums during that period.
- If a qualified beneficiary receives the 11-month extension due to disability, the premiums for the additional 11 months can be increased to 150 percent of the cost of coverage.
Chris Cooley is co-founder of MyHRConcierge and SMB Benefits Advisors. Clients rely on him for COBRACompli administration, employee handbooks, HR compliance and administration, workforce management and benefits advisory solutions. Cooley’s companies specialize in helping small to mid-sized grocers throughout the U.S. Cooley can be reached at 855-538-6947, ext. 108 or at firstname.lastname@example.org.