The unemployment rates are high, as is the COBRA enrollment activity. It doesn’t appear that the unemployment crisis will end soon. What does this mean to brokers? This means that many employers who depend on you don’t care about growing, they worry about survival. These are some COBRA administration survival strategies to help you guide them through this economic wilderness.
You will need to outfit them for the long and exhausting COBRA journey. Many states have laws that provide COBRA coverage for small groups of health plans. Some states have extended the COBRA period beyond the usual 18-months. These are two common COBRA compliance issues:
- Mini-COBRA : Most businesses do not fall under the federal COBRA provisions. Therefore, most states have their own COBRA regulations to protect employees of small firms. These state continuation laws, also known as mini-COBRA, require smaller businesses – typically with between two and 19 employees – to continue coverage for unemployed workers provided they pay the employer share and the employee portion of the premium. Your employers should be ready to comply with both state and federal requirements.
- Extended COBRA periods: A COBRA inconsistency occurs between COBRA coverage periods. Some states have passed laws to extend the COBRA coverage period by 18 months. New York is an example. In July 2009, the state approved a law that allowed workers who are eligible for federal COBRA to choose 18 months of COBRA followed by 18 months of mini-COBRA (state continued coverage) for a total 36 months.
Complexity of COBRA administration is made more complicated by the discrepancies in state continuation laws and federal COBRA laws. It’s a good idea for brokers to be familiar with both the federal and state continuation laws. This will help you to know what COBRA means in your state.
Evaluate cost-effective downsizing strategies. Employers must be objective when assessing the increasing COBRA administration burden and additional state requirements. Many employers find that their current HR capabilities are inadequate. Your clients should be able to anticipate and understand the COBRA administration burden. These are some good points to discuss:
- Are you satisfied with the current COBRA management? Ask about the sufficiency and adequacy of current administration procedures. The COBRA administration burden could be too much. Employers can help evaluate current procedures to make informed decisions about future administration activities.
- What number of employees will be affected? Assist clients with estimating additional COBRA reporting requirements and paperwork.
- What will the final employee count look like after the downsizing? Assist clients in determining where their company will be based on federal COBRA provisions and state continuation laws.
- Are you able to handle additional COBRA administration responsibilities. Have a honest discussion about your employees’ workload. Companies that have fewer employees may find it difficult to manage their administration.
Recognize and eliminate the inherent risks. Human error increases with increasing HR burden. Small errors can lead to large expenses when it comes to COBRA administration. A four-figure overpayment can be caused by a failure to spot a mistake on a bill from one health carrier. This is nothing when you consider the fines and legal fees associated with COBRA noncompliance. Ask employers whether they are willing to “self-insure” these risks. Or if it would be more beneficial to transfer some of the risk over to a COBRA administrator with professional liability insurance. Help clients create processes and checkpoints to reduce the risk of errors if they prefer to administer COBRA internally.
Employers are now challenged to do more with less. You can be a trusted advisor and help clients find smarter solutions, greater efficiency and sustainable survival strategies by staying proactive and informed.
