What employers need to know about COBRA

There’s a lot to understand when it comes to health insurance laws. For employers covered under COBRA, Dan Reichelt, director of billing and enrollment at Sanford Health Plan, answers FAQs about the basics of the law, administrative duties and how Sanford Health Plan can help.

What is COBRA?

COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage is an individual health policy or a health plan through the federal Health Insurance Marketplace. Created in 1985, it provides temporary continuation of group health insurance coverage for employees and their families under special circumstances, such as termination of employment, reduction in hours or a qualifying life event.

“For those that lose coverage, it’s an opportunity to carry that coverage forward so that they’re able to have benefits with the same plan they had,” said Reichelt.

Depending on the type of event and who the beneficiary is, an employee could receive COBRA coverage anywhere from 18 to 36 months.

When should employers communicate COBRA eligibility?

Employers have 30 days to notify their group health plan administrator, usually their insurance provider, when an employee’s employment has been terminated or when their hours have been reduced. Their health insurance administrator then has 14 days to notify an employee about their COBRA eligibility.

“The Department of Labor has a third-party administration rule that gives us 14 days,” Reichelt said. “So if they notify us on May 29, we have 14 days from that date to notify the employee.”

Once a notice of eligibility has been sent, an employee then has 60 days to opt into COBRA. If a health insurance administrator does not hear from them during that time, an employee is no longer eligible to sign up.

Who pays for COBRA?

Generally, the employee pays the full cost of their monthly insurance premiums.

“Employers can actually charge 102% and keep that 2% for administration costs, such as for paperwork and notices,” said Reichelt.

What is required of employers to administer COBRA?

COBRA administration requires the following compliance components:

· Providing timely notice of COBRA eligibility, enrollment forms, duration of coverage and terms of payment after a qualifying event.

· Collecting premiums, reinstating coverage and supplying appropriate notices if premiums are not received.

How does Sanford Health Plan help employers with COBRA?

Sanford Health Plan provides free COBRA administration, from managing notification letters to enrollment forms, billing and more.

This service helps employers save time and money, but it also gives them peace of mind knowing they have experts ready to oversee each stage of COBRA coverage.

“Generally speaking, you don’t have a lot of people who elect COBRA, but when you do, it can be a huge time loss for your back end process and staff, especially if they are unsure how to administer COBRA appropriately and that can leave you at risk,” said Reichelt.

With health insurance from Sanford Health Plan, employers also receive a dedicated local account manager who works closely with agents and client services to serve as an employer’s main point of contact for questions about COBRA and beyond.

“At a larger health plan, you may not get that,” Reichelt said. “We’re pretty one-on-one and we value giving our clients a go-to person so if they don’t know the answer to a question, they can reach out to someone who does.”

Find a plan that fits your needs from Sanford Health Plan and request a quote today using our online form