Most employers in the United States know about COBRA – or they should. However, some employers have made the mistake of assuming that COBRA administration is no longer needed now that the Affordable Care Act is in place.
Earlier this year, for example, a $1 million settlement was approved by the Southern District of Texas, resolving a class action suit which alleged that an employer plan sponsor hadn't informed COBRA beneficiaries of their rights as required under ERISA.
Why are COBRA rights notifications still essential?
While it’s true that the Affordable Care Act makes health care more accessible, it did not make COBRA unnecessary. When employees lose coverage, they may be eligible to purchase coverage through a Special Enrollment Period through the Marketplace. Depending on the circumstances leading to the loss of coverage, employees may also be eligible for COBRA coverage.
In some circumstances, the Marketplace coverage may be more affordable and therefore the best option. On the other hand, some find the COBRA option more attractive because it allows them to continue their existing health plans, keeping the same network, with the same doctor, and with the same out-of-pocket expenses and deductible limits for the year.
Without COBRA, a worker would have no option but to switch to a new plan through the Marketplace, causing their deductible and out-of-pocket expenses to start all over – which can be financially challenging for those in the midst of major treatment.
You have an obligation to make the choices clear.
In the lawsuit mentioned earlier, the employer hadn't distributed the COBRA General Rights and Election Notices, which are required two times: First, when the employee or a qualified beneficiary begins participating in the group health plan, and second, when the employee or qualified beneficiary notifies the employer that a qualifying event has occurred.
Which kinds of plans are subject to COBRA?
According to the Department of Labor, COBRA generally applies to all private-sector group health plans maintained by employers that have at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. A health plan is defined as: “Any arrangement that an employer establishes or maintains to provide employees or their families with medical care, whether it is provided through insurance, by a health maintenance organization, out of the employer's assets, or through any other means. ”Medical care" includes for this purpose: inpatient and outpatient hospital care; physician care; surgery and other major medical benefits; prescription drugs; dental and vision care.”
Life and disability insurance plans are not subject to COBRA. However, in some circumstances, flexible savings accounts and wellness plans can be, so make sure to check with your legal counsel on those.
First and foremost, remember that COBRA administration continues to be crucial. Failure to comply with COBRA regulations can result in costly fines and lawsuits. For this reason (and many others), it’s important that you have a group health benefits partner that stays on the leading edge of health reform changes and can keep you informed and in compliance. Second, don’t forget to take advantage of Higginbotham’s health care administration services including COBRA administration, FSA and HRA administration, open enrollment and wellness communication, HR technology, employee benefits compliance and more.
Contact us with any group health benefit questions you may have. Our expert team is happy to assist.