When Your Health Plan’s Up for Renewal, Don’t Forget Your Former Employees Eligible for COBRA

Wanda Bishop photoAmong the gotchas that lurk at year-end, it’s easy to forget your COBRA population. Not the snakes, but the former employees eligible to stay in your health plan. 

COBRA, you’ll recall, is the Consolidated Omnibus Budget Reconciliation Act. It affects the workplace by providing employees who incur a qualifying event an option to remain for a time, usually 18 months, on the employer’s group health plan. Employers may charge the full cost of the plan, without a subsidy, and most do so.

After the loss of coverage, an employee has 60 days in which he or she can elect to continue coverage under COBRA, retroactive to the day they lost coverage, so there is no break in coverage.

December and January are common renewal dates for group health plans, so this is a year-end issue. The renewal date is when new rates and plan revisions take place and it triggers a 30-day open enrollment window. That’s when employees may join the plan or add or drop family members. 

The law requires employees – and COBRA-eligible former employees – receive written notice of the change explaining the details.

Most employers are focusing on their active employees and the former employees on COBRA are “out of sight and out of mind.” It’s very easy to say, “oops, I forgot the folks on COBRA or the ones still in their 60-day enrollment period.”

Here’s an example of what can go wrong. The employer changes coverage from Blue Cross Blue Shield to United Healthcare, moving all their current employees over to the new plan, but forgets to tell COBRA participants. A COBRA participant goes to pick up a prescription and is told his plan has been cancelled.  He contacts us, the COBRA Administrator, and says “my card’s not working.”

Then everyone scrambles. We’ll send the employer back to the insurance broker, who notifies United, which issues new cards for the forgotten COBRA people. Those people also didn’t receive their timely notice about carrier, coverage, and rate changes the Employer made at renewal. In the worst case, there can be fines for the employer. 

You’re required to offer COBRA if you have 20 or more full-time-equivalent employees. Smaller employers are subject to state continuation requirements, which are similar, though the rules may vary depending on the state.

It’s one more reason to use your year-end checklist – and call us if you have any questions.  

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