At UNICO Group, we are committed to providing you with clear guidance and support as we navigate important regulatory requirements together. One key area where client responsibility is essential is COBRA administration. To help you understand what this means and how it impacts your organization, we’ve outlined the essentials below.
What is COBRA Administration?
COBRA, the Consolidated Omnibus Budget Reconciliation Act, is a federal law that allows employees and their covered dependents to continue their employer-sponsored health coverage for a limited time after certain qualifying events, such as job loss or reduced hours. Employers with 20 or more employees who offer group health plans have specific COBRA responsibilities.
When Does COBRA Apply?
COBRA applies broadly to group health plans that provide medical care, including medical, dental, vision and drug coverage. However, COBRA does not apply to group health plans maintained by small employers with fewer than 20 employees, to the federal government or certain church-related plans.
Impact of State Continuation Coverage
Many states have laws similar to COBRA that apply to fully insured group health plans, including plans maintained by churches and employers with fewer than 20 employees. These are sometimes called mini-COBRA laws. Even if a plan is not subject to COBRA, it may still be required to provide continuation coverage under state insurance laws.
Who is Entitled to COBRA Coverage?
A group health plan is required to offer COBRA continuation coverage only to qualified beneficiaries and only after a qualifying event has occurred.
Qualified beneficiaries include employees, spouses, former spouses, and dependent children covered by the group health plan on the day before a qualifying event. Children born or adopted during continuation coverage are also automatically considered qualified beneficiaries.
What are the Rules for Electing COBRA?
COBRA requires group health plans to provide qualified beneficiaries with a clear election period to decide whether to continue coverage. At a minimum, each qualified beneficiary must be given at least 60 days to choose whether to elect COBRA coverage. This 60-day period is measured from the later of: (1) the date the election notice is provided; or (2) the date on which the qualified beneficiary would otherwise lose coverage under the group health plan due to the qualifying event.
Each qualified beneficiary has an independent right to elect continuation coverage, meaning that employees, spouses, and dependent children can make individual decisions. However, the covered employee or spouse may elect coverage on behalf of all qualified beneficiaries for the same qualifying event. Additionally, a parent or legal guardian may elect on behalf of a minor child.
If a qualified beneficiary initially waives COBRA coverage during the election period, they may later revoke that waiver and elect coverage, provided the revocation occurs before the election period ends. If coverage is elected after revoking a waiver, it typically begins on the date the waiver was revoked.
Who Pays for COBRA Coverage?
Qualified beneficiaries may be required to pay for COBRA coverage, although plan sponsors can choose to provide continuation coverage at reduced or no cost. The maximum amount charged to qualified beneficiaries cannot exceed 102% of the cost of the plan.
For qualified beneficiaries receiving the 11-month disability extension, the premium for those additional months may be increased to 150% of the plan’s total cost of coverage.
Premiums must be fixed in advance for each 12-month cycle, and plans must allow monthly payments with a minimum 30-day grace period. Plans must provide at least 45 days after the election for making an initial premium payment. If a qualified beneficiary fails to make any payment before the end of the initial 45-day period, the plan can terminate the qualified beneficiary’s COBRA rights.
How Does COBRA Apply to Me?
Use our Employer COBRA Eligibillity Calculator to easily find out if your group is required to offer COBRA next calendar year. It is based on total full-time and part-time hours worked in a 6-month window.
Client COBRA Responsibilities
Specific COBRA responsibies include sending timely and accurate notices to eligible individuals, such as:
General (Initial) Notice
This notice explains COBRA rights and must be provided within the first 90 days of coverage. It can be included in the Summary Plan Description (SPD).
Election Notice
Describes the right to elect COBRA continuation coverage and how to do so. Qualified beneficiaries have at least 60 days from the later of the notice date or loss of coverage to make their election. Each qualified beneficiary has an independent right to elect coverage, but the employee or spouse can elect on behalf of others.
Qualifying Event Notice
Sent after qualifying events like termination, reduction in hours, divorce, or loss of dependent status. The plan administrator must provide this notice within 14 days after receiving notice of the event, or within 44 days if the employer is also the plan administrator. Clients must notify the plan administrator of divorces or dependent status changes.
Early Termination Notice
Required if COBRA coverage ends sooner than expected, explaining the reason and termination date.
Corresponding Maximum Coverage Periods to Qualifying Event
Termination of employment: 18 months
Reduction of hours: 18 months
Divorce or legal separation: 36 months
Covered employee’s death: 36 months
Child’s loss of dependent status under plan’s terms: 36 months
Entitlement of Medicare: 36 months
Employer bankruptcy (for retirees and their dependents): 36 months
Coverage periods may be extended due to disability (an additional 11 months) or a second qualifying event (up to 36 months total).
Importance of Accuracy and Timelines
Administering COBRA correctly is critical due to strict legal requirements and timelines. Errors or delays can lead to significant financial penalties and compliance risks. Early termination of coverage must be communicated promptly with a detailed notice.
Final Thoughts
We encourage you to take responsibility for these key administrative tasks or engage a trusted COBRA administrator to ensure compliance and minimize risk. At UNICO, we are here to support you with guidance and resources as you manage these responsibilities. If you have any questions about COBRA administration or need assistance, please reach out to your team at UNICO. Together, we’ll ensure your compliance and peace of mind.
