The Patient Protection and Affordable Care Act (PPACA) enacted March 23, 2010 has made significant changes to both COBRA and HIPAA regulations. Tucker Administrators is current on all COBRA and HIPAA law. Please call us today at 704-525-9666 to discuss your COBRA/HIPAA needs.
COBRA/HIPAA Compliance Services
A Component of Tucker Administrators’ Employee Benefit Risk Management Program
Wouldn’t you rather focus on your business than handle COBRA and HIPAA administration yourself? The Consolidated Omnibus Benefit Reconciliation Act (COBRA) is a complex law requiring an employer with 20 or more full-time employees to offer the company’s group health plan coverage to covered employees and their covered dependents who are voluntarily or involuntarily terminated from the group health plan. How the individuals are notified, the timing of the notification letters and the appropriate enrollment forms are critical to COBRA compliance. In addition, you will need to comply with new COBRA requirements, which include paying a 65 percent government subsidy to employees who are involuntarily terminated between September 1, 2008 and December 31, 2009.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was enacted to reduce the number of individuals who change jobs and may not have had access to health coverage due to pre-existing conditions. HIPAA provides additional opportunities to enroll in a group health plan if you lose other coverage or experience certain life events and prohibits discrimination against employees and their dependent family members based on any health factors they may have, including prior medical conditions, previous claims experience, and genetic information. However, the Patient Protection and Affordable Care Act (PPACA) has changed part of the HIPAA regulations so that employer plans may not impose a pre-existing exclusion for benefits for dependents under the age of 19. For children under the age of 19, the prohibition on pre-existing conditions starts for plan years beginning 6 months after the date of PPACA enactment (March 23, 2010). For plan years beginning on or after January 1, 2014 plans may not impose a pre-existing condition exclusion for any individual regardless of age.
HIPAA allows these individuals age 19 or over to reduce or eliminate this preexisting condition limitation by providing proof of past coverage to the new group health plan. For example, if an employee is terminated after being employed (and covered) for 24 months, the 6 month preexisting condition limitation in a new employer plan is entirely waived. The employee must prove to the new employer the 24 months of prior coverage. HIPAA requires that all employers provide this Certificate upon loss of coverage. The individual must deliver this Certificate of Creditable Coverage to the new employer.
Compliance to COBRA and HIPAA requires an investment of time, knowledge of COBRA and HIPAA law and administrative expertise. Making even a simple mistake of sending a COBRA or HIPAA letter with incorrect language, or at the wrong time to a beneficiary or eligible individual can easily cost an employer hefty fines. Tucker Administrators is current on all COBRA and HIPAA law, and our administrative resources will keep you in compliance.
Why Tucker Administrators?
- Budget and control administrative costs.
- Minimize the risk of penalties and fines for non-compliance.
- Utilize your labor force more efficiently.
- Save time, money and headaches by eliminating COBRA aggravation
FAQ About COBRA Continuation Health Coverage
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.
COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.
There are 3 elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:
Plan Coverage - Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction on an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time.
Qualified Beneficiaries - A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is an employee, the employee's spouse, or an employee's dependent child. In certain cases, a retired employee, the retired employee's spouse, and the retired employee's dependent children may be qualified beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.
Qualifying Events - Qualifying events are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.
Qualified beneficiaries must be offered coverage identical to that available to similarly situated beneficiaries who are not receiving COBRA coverage under the plan (generally, the same coverage that the qualified beneficiary had immediately before qualifying for continuation coverage). A change in the benefits under the plan for the active employees will also apply to qualified beneficiaries. Qualified beneficiaries must be allowed to make the same choices given to non-COBRA beneficiaries under the plan, such as during periods of open enrollment by the plan.
Beneficiaries may be required to pay for COBRA coverage. The premium cannot exceed 102 percent of the cost to the plan for similarly situated individuals who have not incurred a qualifying event, including both the portion paid by employees and any portion paid by the employer before the qualifying event, plus 2 percent for administrative costs.
For qualified beneficiaries receiving the 11 month disability extension of coverage, the premium for those additional months may be increased to 150 percent of the plan's total cost of coverage.
COBRA premiums may be increased if the costs to the plan increase but generally must be fixed in advance of each 12-month premium cycle. The plan must allow qualified beneficiaries to pay premiums on a monthly basis if they ask to do so, and the plan may allow them to make payments at other intervals (weekly or quarterly).
The initial premium payment must be made within 45 days after the date of the COBRA election by the qualified beneficiary. Payment generally must cover the period of coverage from the date of COBRA election retroactive to the date of the loss of coverage due to the qualifying event. Premiums for successive periods of coverage are due on the date stated in the plan with a minimum 30-day grace period for payments. Payment is considered to be made on the date it is sent to the plan.
If premiums are not paid by the first day of the period of coverage, the plan has the option to cancel coverage until payment is received and then reinstate coverage retroactively to the beginning of the period of coverage.
If the amount of the payment made to the plan is made in error but is not significantly less than the amount due, the plan is required to notify the qualified beneficiary of the deficiency and grant a reasonable period (for this purpose, 30 days is considered reasonable) to pay the difference. The plan is not obligated to send monthly premium notices.
COBRA beneficiaries remain subject to the rules of the plan and therefore must satisfy all costs related to co-payments and deductibles, and are subject to catastrophic and other benefit limits.
The Plan Sponsor (the employer) is ultimately responsible for the proper administration of COBRA. However, because of the complexity of COBRA law, most employers hire a Third Party Administrator (TPA) to administer the day-to-day operations of COBRA. Below are the highlights of employer responsibilities, and what TPAs are hired to do:
- Notify employees and covered spouses of their COBRA Rights when they first become covered under the employer's health plan(s).
- Notify employees and/or covered dependents, within 14 days of the COBRA Qualifying Event date, of their ability to elect COBRA continuation of coverage and provide election forms.
- Maintain records to prove notifications were sent within their specified timeframes.
- Track COBRA election periods and length of coverage.
- Invoice COBRA premium payments and balance bill short payments.
- Maintain payment records and correspondence.
- Notify COBRA continuants of benefit changes and any open enrollment periods.
- There is an IRS excise tax penalty of $100 per day for each violation. This fine can be increased to $200 for each day for which there was more than one Qualified Beneficiary per family.
- In addition to the IRS excise tax penalty, there is an ERISA penalty of $110 per day payable to each Qualified Beneficiary for each day the employer was not in compliance.
- The employer can be held liable for payment of legal fees, court costs and even for medical claims incurred by a Qualified Beneficiary.