As an employer, you know you’re responsible for communicating information to employees. From updating an employee on their new job details to communicating company health benefits, you make sure your employees are informed. But does the responsibility stop once an employee is no longer on the payroll?
COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985, is a federal law that requires employers to inform employees about their continuous health care coverage options once employment ends.
When a qualifying event leaves an employee unable to meet eligibility requirements (e.g. reduction in hours or loss of employment), the employer needs to avoid common COBRA mistakes that could land them in hot legal water.
Benefits and plans COBRA coverage applies to include:
- Health care plans
- Dental plans
- Vision plans
- Health spending accounts
- Prescription plans
- Hearing plans
- EAP plans
Essentially, COBRA allows employees to continue with the same type of health coverage and related benefits they enjoyed during employment. Also, life insurance and retirement programs, such as 401(k) accounts, are not covered by COBRA.
If your business is covered under COBRA laws, find out the steps you need to take to prevent frustration, and in a worst-case scenario, litigation.
Here are four common COBRA mistakes to avoid.
4 Common COBRA Mistakes Employers Make
Do you know your COBRA laws? An honest mistake could spell disaster, especially if an employee sues. The good news is that it only takes a bit of research to make sure you’re abiding by applicable COBRA laws.
1. Not offering COBRA coverage to qualified employees
You must follow COBRA laws if you:
- Have 20 or more employees
- Offer a group health plan
If an employee no longer meets the requirements for a group health plan due to a qualifying event, you are required to provide them with COBRA coverage information. COBRA information should also be offered to spouses and dependents of employees if they qualify for coverage.
However, there are exceptions. You do not have to provide COBRA coverage details to employees who had not yet met health care eligibility (e.g. not employed long enough) or an employee who did meet requirements but declined coverage.
2. Missing a qualified event
Not all circumstances trigger COBRA coverage. But not knowing the difference can spell serious legal troubles for your business. The two most common qualifying events that can enact COBRA coverage are:
- A reduction in hours
- Voluntary or involuntary termination (unless the cause is gross misconduct)
COBRA doesn’t define misconduct so choose wisely in such a situation. If an employee challenges your choice to not provide COBRA, the cost of a legal battle could add up quickly. Also, remember as an employer you’re only required to offer information on COBRA coverage, not pay the premiums (though you can elect to pay all or a portion as part of a severance package).
You may also be required to offer COBRA directly to spouses or dependents of employees in the event of divorce or the death of an employee. Dependents also qualify for COBRA once they reach an age that removes them from their parent’s health plan.
3. Poor communication
You must properly communicate COBRA coverage and terms to employees through the Initial Notice. When a new employee is hired, both the employee and, if applicable, their covered spouse must be informed of their COBRA rights when first joining the company health plan.
Should a qualifying event occur, an employer has 30 days from the loss of coverage to notify the plan administrator, who then has 14 days to provide a COBRA election notice to the former employee. The former employee has 60 days from the notification date to make an election decision. Should they elect COBRA coverage, they have 60 days from notification or from the last day of coverage (whichever is later) to pay the first premium.
Also, to help provide proper notice, use the Department of Labor’s Model General Notice and Model Election Notice documents, available on their website. Employees typically have 60 days to decide if they want to continue coverage through COBRA.
4. Ignoring state COBRA laws
Check with your state’s COBRA laws. In some states, employers with less than 20 employees may be required to provide continued health care coverage, despite the federal minimum. Some states also have unique eligibility requirements and covered period limits.
Such laws, often referred to as mini-COBRA laws, can change over time. Make sure to review your state’s mini-COBRA laws annually.
COBRA compliance can seem overwhelming, especially when dealing with a qualifying event for the first time. Lastly, research your requirements as an employee and reach out for professional help to avoid common COBRA mistakes.
To learn more about COBRA and your requirements as an employer, read An Employer’s Guide to Group Health Continuation Coverage Under COBRA, provided by the United States Department of Labor.