The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, ensures that employees can continue health insurance coverage in the case of a job loss or significant adjustment in hours. COBRA regulations are complex, and compliance errors can be very costly. As a result, employers often outsource their COBRA administration to a qualified third-party administrator (TPA).
Pitfalls of In-House COBRA Administration
Employers who decide to self-administer may find they did not fully comprehend the extent of COBRA requirements and the consequences of non-compliance. Some common challenges and misconceptions include:
- COBRA eligibility extends to plans beyond traditional group health coverage. For example, Health Reimbursement Arrangements (HRAs) are considered self-insured health plans, and Flexible Spending Accounts (FSAs) also qualify as medical plans. As a result, both types of accounts are COBRA-eligible in certain circumstances.
- Smaller employers that don’t meet federal COBRA requirements may be obligated to offer State Continuation or “mini-COBRA.” Federal COBRA requirements apply to all employers who offer a group health plan and employ at least 20 people for more than half of their typical business days in the previous calendar year. Mandated only in certain states, “mini-COBRA” applies to employers with fewer than 20 employees. However, exact requirements vary from state to state.
- Employees who become eligible for COBRA must receive certain notices containing specific language within mandated timeframes. Notification, language, or timeliness errors can result in significant financial penalties.
Outsourcing COBRA Administration
When an employer outsources COBRA administration, choosing the best TPA for their needs is essential. The best administrator will efficiently and effectively meet employer compliance and financial requirements while providing affected employees and dependents with a smooth COBRA experience.
Best Employer COBRA Experience
The best COBRA administrator will issue timely notices, handle financial reporting, monitor participant elections and payments, and respond to participant questions and concerns. The TPA’s experience and in-depth knowledge of compliance regulations and requirements serve to eliminate potential penalties. Finally, the administrator ensures participant payments are received on time and correctly applied. TPA services save the employer time and expense and lessen regulatory exposure.
Best Employee COBRA Experience
The best administrator will provide qualified employees and dependents an efficient way to continue their group health insurance and, where needed, serve as a buffer between the parties. Participants receive timely and effective notices and communications, whether they decline or enroll in coverage. Those who enroll can quickly and conveniently manage their premium payments.
Advanced Technology Support
The COBRA administration software that a TPA uses can significantly impact the COBRA experience for the TPA, employer, and participant alike. Does the system provide timely, accurate and thorough reporting? Does it include an easy-to-use mobile app, that enables COBRA participants to manage their accounts, access needed information, and make mobile payments? Is the software efficient for the TPA to use and backed by responsive customer support when needed?
Final Thoughts
HR departments of successful employers have more than enough to manage. With so many COBRA compliance regulations and penalties, employers are well-advised to outsource their COBRA administration to a TPA partner with knowledge and expertise in this challenging arena. Consider the above factors when choosing the best COBRA administration partner for your business.
For 40 years, DataPath has been a pivotal force in the employee benefits, financial services, and insurance industries. The company’s flagship DataPath Summit platform offers an integrated solution for managing CDH, HSA, Well-Being, COBRA, and Billing. Through its partnership with Accelergent Growth Solutions, DataPath also offers expert BPO services, automation, outsourced customer service, and award-winning marketing services.