Administer COBRA to the Law

Don't Add you Own Variances to COBRA, October 6, 2019

We frequently receive questions regarding whether or not to make exceptions to COBRA guidelines regarding late payments, late elections, etc. Being sensitive or compassionate to an individual’s situation is typically good practice; however, with COBRA it is best to stick to the guidelines. When you make exceptions to the COBRA rules you are setting a precedent – that means you will also need to apply it to all future instances. Following are a few examples where employers should give careful thought and consider sticking to the COBRA timeframes:

COBRA Premiums

COBRA has set time frames for the qualified beneficiary (QB) to make their COBRA premiums; there is a 45 day grace period for the 1st payment and then a 30 day grace period thereafter. If a QB requests that you accept a late payment, the employer should consider sticking to the rules and not allow for the additional time. The exception here would be an insignificant premium underpayment or incapacity (mental or physical incapacity that makes an individual unable to act or respond).

Secondary Qualifying Events

To be eligible for a secondary qualifying event (death, divorce or legal separation, loss of dependent status or Medicare entitlement) the qualified beneficiary has 60 days to notify the plan administrator of the secondary event. The 60 day clock does not start until the employer provides the notice for this event. If the QB notifies the employer outside of the 60 day time frame the employer should confirm that the notice was provided to the QB in a timely manner. If so, then it would be prudent to adhere to the 60-day timeframe.

Disability

This extension allows a qualified beneficiary to lengthen COBRA from 18 months to 29 months if the following requirements are met: (1) A Participant must have been disabled (prior to or) within 60 days of the COBRA start date; (2) The Social Security Administration will make the determination as to the eligibility for Social Security benefits and notify the individual if they are considered disabled; (3) The participant needs to provide a copy of this determination prior to you offering the 11 month extension.

During this disability extension period the employer can charge up to 150% of the COBRA premium. It is important for the employer to remain consistent and charge all qualified beneficiaries the 150 percent or the determined amount for the disability extension period.

Providing COBRA beyond 18 months

In some cases an employer might feel sorry for the situation a qualified beneficiary is in and want to extend the COBRA coverage over the 18 month time frame. COBRA has established timeframes for each event. For termination and reduced work hours COBRA provides 18 months of coverage. For other events like death of employee, divorce and loss of dependence status COBRA provides 36 months of coverage. Extending these timeframes is not in the employer’s best interest and may lead to establishing an unwanted precedent. Especially since the insurer may not allow it.

Late Elections

Qualified beneficiaries must be given at least 60 days for the election. This period is measured from the later of the coverage loss date or the date the COBRA election notice is provided by the employer or plan administrator. The important aspect of this is to view the postmark date on the election as the official date to use in these circumstances. Again, accepting an election notice past the 60 day election period is not good practice. You definitely do not want to set a precedent with the election period.

If an employer does decide to make an exception to the COBRA rules, they should consider the negative and positive consequences of the rule and determine how the decision would impact a precedent and the likelihood of the circumstances being repeated. The employer also must confirm with the insurer if making exceptions outside the COBRA rules to make sure they would be allowed. Lastly, make sure to communicate with everyone involved and document the reasons justifying the exception.

TIP: Although COBRA states the minimum requirements for continuation coverage, many employers have looked to provide more than the law requires and have found themselves in noncompliance. Just stick by the rules!