COBRA Administration

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When we look at companies doing in-house COBRA administration, we don’t see a whole lot of benefits… no pun intended.  It’s a process that companies are better off outsourcing, and we think most people will agree, but for you skeptics out there…

Here are four reasons companies should outsource COBRA administration:

1. It’s an administrative nightmare – There are three components to this:
  • Eligibility Tracking – COBRA eligibility tracking alone is enough of a reason to get this process managed by a third party. There are a number of COBRA qualifying events that constitute eligibility, including a reduction in hours, involuntary termination (except for gross misconduct), voluntary termination, Medicare eligibility, divorce or legal separation, a child losing dependent status, or death.  If you’re interested in learning more, here’s a blog post that covers eligibility in more detail.

  • Monitoring Coverage Periods and Timelines – If an individual enrolls in coverage after a qualifying event, there are various time periods in which the coverage needs to be provided for. Typically, these coverage periods are either 18 or 36 months.

  • Managing COBRA Notices – There are a myriad of different notices that need to be distributed for different reasons. As we take on new clients, we constantly see that the general or initial notice is typically not provided, yet it’s a notice that’s required to be distributed to employees within 90 days after a benefits enrollment The other most common notice is the qualifying event notice, which is provided during one of the events explained in the eligibility tracking section above.  There are a bunch of other notices too like late payment, partial payment, early termination, and unavailability of COBRA notices.

2. Virtually no positive impact on the company – when most processes or tasks being executed in a company are evaluated, some sort of positive impact is had as a result of these things being done. Particularly for HR-related tasks, we can usually point to an impact on the recruitment, satisfaction, retention, or growth of employees… and from a general task perspective cost savings or revenue growth.  However, with in-house COBRA administration, this really isn’t the case.

When we look at the eligibility section above, in most cases, COBRA is being administered for people that do not currently work for the company.  Whether it’s an employee that is no longer with the company or a dependent of an employee or former employee.  And with mandatory low to no impact tasks like these, it’s usually better to outsource these things and take on a higher impact task in-house

HR Admin looks uncomfortable doing COBRA Administration for an ex-employee3. It can be… uncomfortable – There can be discomfort in handling COBRA for ex-employees. Let’s say an employee is fired or laid off.  Companies don’t necessarily want to deal with the awkwardness of the communication that has to occur with these ex-employees regarding COBRA benefits. 

Even if an employee leaves on their own accord.  Maybe there is a little animosity there.  Companies, smaller ones in particular, potentially don’t want to handle communication with that individual anymore.  Even if an employee gets divorced, it can be an uncomfortable situation talking to that employee’s former spouse about their COBRA rights.  A COBRA administrator is an unbiased third party that handles these situations in a friendly, simple way, helping these people navigate the complexities of these benefits. 

4. Potential Cost of Non-compliance is HIGH – COBRA is enforced by the Internal Revenue Service (IRS) and Department of Labor (DOL), so non-compliance penalties can be costly as both organizations can levy fines and taxes. Not complying with COBRA regularly can result in excise tax penalties of $100 or more per day if multiple people are affected.  There are also statutory penalties of up to $110 per day which were determined by the Employee Retirement Income Security Act (ERISA). In addition to the fines and penalties, non-compliance can lead to civil lawsuits from individuals which can result in a plethora of additional costs. One large financial company recently paid almost $300,000 in penalties for not complying with COBRA. Why would companies risk the same outcome by inconsistently administering COBRA in-house?  Outsourcing COBRA administration will significantly reduce the risk of ending up like this financial firm.  

With EverythingBenefits’ COBRA Administration software and service, compliance can be one less thing for companies to worry about.  We do the heavy lifting by automatically tracking for potential COBRA qualifying events, generating the necessary notices and handling communication with the beneficiaries, collecting and managing the premium payments (if applicable), and providing beneficiaries with access to your group benefits coverage.

cobra administration case studyIt's not just easy for companies, it's easy for COBRA qualified beneficiaries too.  Once someone becomes eligible, they can easily enroll, make payments, cancel coverage at any time, and participate in the company's open enrollment too.  With reporting that provides insight into what we're doing behind the scenes, everyone is simply in compliance... and it's all fully audited, so there's proof that everyone is complying.

Want to see it live? Request a demo to see how EverythingBenefits can benefit your company! You may also want to download our COBRA Administration solution guide or Case Study.

 

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