Blog

COBRA Solutions, Inc.

2023 The End of the National Emergency due to COVID-19

On February 10, 2023, President Biden signed Doc. 2023-03218, that extended the ongoing national emergency concerning the COVID-19 pandemic to continue beyond March 1, 2023.  Within the same document, he stated that he anticipated terminating the national emergency on May 11, 2023. Then, on April 10, 2023, the President signed into law H.J. Res. 7, which terminated the national emergency effective immediately.

COBRA Solutions, Inc. has reviewed the law and has determined the procedures needed to get back to normal COBRA Administration. Please take the time to read and understand how this announcement will affect your COBRA administration.

What was changed by the National Emergency? 

Effective March 1, 2020, the Disaster Relief and Emergency Assistance Act implemented numerous changes to assist citizens and businesses during the pandemic. Specific to COBRA, it provided “extended” time frames for Plan Participants, Qualified Beneficiaries, and Claimants. These changes mandated that COBRA Administrators “disregard” the normal sixty-day election period and the forty-five/thirty-day standard premium payment grace period until sixty-days after the announced end of the National Emergency or what they called the “Outbreak Period.”

When the law was written, it was assumed that it would be a short-term assistance package.  However, after one year the national emergency was renewed (a national emergency expires after one year, if not renewed) and the Department of Labor released Notice 2021-01 which provided guidance for Plan Administrators and affected individuals. It limited the disregarded period for individuals to 1-year from the date that the individual was required to act or 60-days after the announced end of the national emergency.

When is the change effective?

The law stated that the standard election period and premium payment grace periods would begin sixty-days after the announced end of the National Emergency. This makes the effective end date June 9, 2023 (or the described Outbreak Period).

What changes have been made to the COBRA Administration Manager due to the end of the national emergency?

After updating your software to version 23.5.x, you will see the following changes.

  • The notices will continue to show information on the extended election period until June 9, 2023; thereafter there will be no mention of the national emergency and its extended time frames.
  • COBRA-qualified beneficiaries who are sent a qualifying event notice between April 10, 2023, and June 9, 2023, will receive an additional election extension of no more than 60-days.
  • COBRA-qualified beneficiaries who previously experienced a qualifying event or whose qualifying event letter was sent after April 10, 2022 (one-year prior to the national emergency end date) will begin their normal 60-day election period on June 9, 2023, subsequently ending on August 8, 2023.
  • COBRA Participants will return to standard premium payment grace period (45-day initial or 30-day subsequent) on June 9, 2023 (60-days after the outbreak period).
  • The suspension of COBRA coverage and the associated notice will end on June 9, 2023.
  • An End of National Emergency letter has been added so that you may communicate with affected individuals of the end of the national emergency.
  • The COBRA reports have been updated to use the end of National Emergency date.

Do we need to notify COBRA Qualifiers and Participants of the end of the National Emergency?

Yes, we believe that you should. At this time, sending a letter to affected individuals is not required by law, but the Department of Labor has recommended that plans communicate the end of the National Emergency to impacted individuals in advance.

How do I update my software to the new version?

To perform an update to your software, start the COBRA Administration Manager software and under the File menu, select “Update Software via Internet” and then follow the provided instructions.

2021 COVID-19 COBRA Extensions Compliance Information

It has been one year since the relaxed COBRA timeframes became effective on March 1, 2020 and as we reach the 1 year anniversary we finally receive guidance from the Department of Labor in the form of a “Joint Notice.” The joint notice is a collective effort from the Department of Labor, the Department of the Treasury, and the Internal Revenue Service.

The joint notice reveals that the Outbreak relief period is expressly limited by statue to a period of one year and each qualified beneficiary will be treated on an individual bases and be allowed the 1 year timeframe extension or until the outbreak has ended.

Obviously this puts a huge burden on employers and COBRA administrators. Trying to track all these new timeframes is very difficult. This is where your software comes in to play. With version 21.3.x (available for download now), your software will do the following things.

  • Track 1 year anniversary dates for each QB
  • Terminate coverage for participants that have passed their 1 year anniversary (applicable COBRA timeframes still apply).
  • Return to normal 45-day and 30-day payment grace period for COBRA participants that have have passed their 1 year anniversary.

With all these new changes, we have a couple of examples that should help you understand the how the election and premium payment grace period extensions will end.

Example 1: Thomas has a COBRA qualifying event on September 30, 2020, but does not elect COBRA. Assuming the national emergency is not ended prior to September 30, 2021, Thomas will receive 60-days after his 1 year timeframe extension (November 20, 2021) to elect COBRA.

Example 2: Debbie has a qualifying on August 31, 2020, but does not elect COBRA. On May 31, 2021 the president ends the National Emergency. Debbie will receive 60-days after that and then another 60-days (normal COBRA timeframe) to make her COBRA election (or until September 28, 2021).

COVID-19 COBRA Timeframe Extensions

On March 13, 2020, President Trump issued the Proclamation on Declaring a National Emergency concerning the COVID-19 outbreak with an effective date of March 1, 2020. As a result of the National Emergency, participants and beneficiaries covered by group health plans (or other employee welfare benefit plans) may be encountering problems in exercising their health coverage portability and continuation coverage rights. For this reason, Federal government agencies have extended certain timeframes otherwise applicable to group health plans. Although the National Emergency changes numerous timeframes, this article will address how the law affects COBRA.

With many businesses closing down over the past couple of months, employees (and COBRA Participants) have many questions related to their employer-sponsored group health plan. What if my employer doesn’t pay the group insurance premium? If I am terminated, will COBRA be offered to me? I sent back my COBRA Election Form with premium, but I have not been reinstated – what should I do? The Third Party Administrator that collects my COBRA premium is closed and not forwarding the funds to my employer – will I be terminated? In these recent months, many individual’s health coverage was/is in jeopardy, so the government took action to slow down the process of terminating employees from a group health plan.

To make sure people did not inadvertently lose coverage, the government extended COBRA-related timeframes until the end of the “outbreak period.” The question is - when is the end of the outbreak period? At the time of this publication, that date had not been determined. The Federal Register states that COBRA related timeframes will be placed on hold until an “outbreak period End Date” has been announced. Once the End Date has been determined, they are providing a sixty (60) day processing period before the normal COBRA-mandated timeframes begin. For example purposes only, if the outbreak End Date is determined to be June 30, 2020, we can then calculate the COBRA-related timeframes. First, we add the 60-day processing period, establishing an August 29, 2020 “Determination Date.” From this Determination Date, we would begin tracking COBRA’s normal mandated timeframes.

COBRA Qualifiers with a qualifying event date between March 1, 2020 and August 29, 2020 (based upon the above example date) would be offered their 60-day election period beginning on the Determination Date to elect COBRA. Administrators would still notify the insurance carrier to terminate group coverage as of their qualifying event/loss of coverage date. If they elect COBRA, they would be reinstated back to the date coverage was lost and provided 45-days from August 29th (as in the above example) to make their initial COBRA premium payment. It is recommended that you do NOT reinstate these Qualifiers until an initial premium payment is made. COBRA Qualifiers may NOT elect their COBRA Start date; they will be retroactively reinstated to the date coverage is lost and responsible for all premium payments back to their COBRA start date.

Premium payments that are received will be applied to the first month that premiums are due. So, if a Participant is paid through April 30th and you receive a payment in August, those funds would be applied to May and following months in succession. The Participant is NOT allowed to tell you what months they wish the payment to apply.

During the outbreak period, if premium payment is not received, the Participant’s account should be suspended. Administrators should notify the carrier that the Participant had not made their standard payment and should be terminated/suspended at that time. The software will inform you in the Things-to-do box to send a COVID Suspension notice (instead of the usual termination for nonpayment notice). This will be the Administrator’s trigger to contact the insurance carrier(s) and inform them to terminate/suspend the Participant’s account. If payment is received within the 30-day (45 day initial) grace period (commencing on the Determination Date), payment will be applied beginning with the month after the paid through date. Claims will be paid for months with full premium payment.

For nonpaying COBRA Participants during the outbreak period, they will be informed by health providers and pharmacies that they do not have coverage. The suspension notice informs them to keep receipts for all covered benefits and submit a claim for reimbursement after premiums are paid. Participant will need to work with the insurance companies in receiving reimbursement for incurred claims during the extension.

Federal Government Release:
Federal Register - https://www.federalregister.gov/documents/2020/05/04/2020-09399/extension-of-certain-timeframes-for-employee-benefit-plans-participants-and-beneficiaries-affected

Department of Labor - https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/covid-19.pdf

New Department of Labor COBRA Letters

Recently, the Department of Labor release new revisions of the DOL General Notice and DOL Qualifying Event letter. Upon our initial review, we found mainly wording changes, not changing the expressed meaning of the notifications. It seems the new letters replaced more complex words with “more common” variations.

To receive these new letters, you will need to perform an update. The most common method for obtaining the update is to:

  1. Under the File menu, select the “Update Software via Internet” option. (If Microsoft Windows asks if you wish to start as “Administrator,” select “No.”);
  2. Click the Next button to access the files;
  3. You will be asked if you wish to review the new letters. You can select the desired letter and you will be shown the changes in red text.
  4. Click the Next button and you will be provided a button to select the letters you wish to update and the groups that will be updated. If you do not select the letters (which is not recommended), they will not be updated in your system.
  5. If you are a Third Party Administrator and make your own changes to the notice, you may want to just update one group. Upon completion, you can add/remove information as you wish and they save the document. Once saved, you may go under Notifications > Copy Letters to Other Groups. Select the altered letter(s) and the groups you wish to update and click the Copy Now button.

Upon completion, you will be given a Congratulations message and the COBRA software will restart.

If your firewall blocks you from obtaining the update through the software (as described above), you can directly download it by visiting www.cobrasolutions.com/firewall.

  1. Click on the “Updating Version 20 when you have a firewall;
  2. Follow the instruction on the web page;
  3. Under step #3, you will be asked to provide a password for the update.  The current password can be found in the emailed version of this newsletter (right column).
  4. Continue to follow the steps followed by entering the COBRA Administration Manager and replace the current letters with the new ones. (If you are a TPA, you may want to update just one group first, following step 5 above.)

When Administrating COBRA it is Best to Stick to the Guidelines

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:

A Participant must have been disabled (prior to or) within 60 days of the COBRA start date. 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. 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.

COBRA Training 101

As we enter a new year, we receive numerous phone calls regarding COBRA administration procedures. And with the addition of many new users, our staff feels it important to go through the basics of COBRA administration so everyone has a clear understanding as to "what needs to be done when" and your administration responsibilities. We know that this may be elementary for many of our seasoned professionals but we still recommend that you take the time to read through it.

• What is COBRA?
• What is a qualifying event?
• What are the required notifications?
• What about COBRA Premiums?
• What is a disability extension?
• What is a Multiple Qualifying Event?

Q: What is COBRA?
A: In July of 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act, commonly known by its acronym COBRA. In the 1980's (as with today), the population of uninsured Americans was growing at an alarming rate. Congress determined that many of these uninsured individuals have some relationship to an employer. Their thought was to create legislation that would allow employees and covered dependents the ability to temporally continue their group coverage for a reasonable amount of time when they experience a "qualifying event."

Q: What is a qualifying event?
A: There are two types of qualifying events; ones that affect employees and others that affect an employee's dependents. The two qualifying events that affect employees are (1) Termination of Employment (for reasons other than "gross misconduct") and (2) Reduction in Work Hours. To be considered a qualifying event, the employee must have a loss of coverage. (Example: If an employee has a reduction in work hours but is still eligible to continue under the group plans, there is no qualifying event.) Employees experiencing one of these events are eligible to continue coverage (for themselves and their covered dependents) for up to eighteen months under federal COBRA. (Some states such as California, New York, Connecticut and Texas have extended the maximum time frame.)

Dependents have their own qualifying events; Death of the Employee, Divorce or Legal Separation, Employee's Medicare Entitlement and Dependents that no longer meet the definition of a "Dependent" under the group insurance contract. Covered dependents that experience these qualifying events (in most cases) will experience a loss of coverage and should be offered the right to continue for up to thirty-six months.

Members losing coverage upon experiencing one of these events is classified as a "qualified beneficiary." Each qualified beneficiary has independent rights under COBRA. This means a spouse or dependent child may continue singularly on the group plan as if they were an employee of the company. They may only enroll on the plan(s) they were enrolled on the day prior to the qualifying event (unless they move from a specific service area and another plan is available). At Open Enrollment time, the qualified beneficiary has the same rights as "similarly-situated active employees" and may add/change plans, even add dependents. Dependents added during open enrollment do not receive the same rights as a qualified beneficiary but merely may continue coverage with the qualified beneficiary. In the software, we refer to qualified beneficiaries as "qualifiers."

Q: What are the required notifications?
A: COBRA requires employers (with twenty or more employees on at least half of the business days in the previous calendar year) to provide written notifications to inform employees and their covered dependents of their rights to continuation coverage. The law requires seven notices; the General Notice, Qualifying Event Notice, notice of Conversion rights under eligible group plans, Open Enrollment letter, Short Payment Letter, Unavailability of COBRA notice and a Termination letter when the qualified beneficiary terminates coverage prior to the end of his COBRA term. All notifications may be sent by USPS first class mail. (Administrators are not responsible to verify the qualified beneficiary receives the notice but merely prove it has been sent to the last known address.) The General Notice is designed to be sent to newly-hired employees as they enroll on one or more of the group plans. This notification explains COBRA and the steps necessary for notifying the Plan Administrator of a qualifying event. This notice should be sent to both the employee and covered spouse. Many insurance companies include the General Notice in their certificate of coverage but it is recommended a notice be sent via mail. COBRA requires the General Notice be sent within ninety days from the date coverage becomes effective. To produce this letter in the software, click File and Newly Hired (Active) Employee and enter the employee's information. Double click in the Things-to-Do box on the line that states "Send DOL General Notice to . . ." and the letter will be produced. Since all employees should have been provided this notification at some time; if you cannot prove they receive it you should send another and place a copy in their file. (Once printed, the letter will be saved in the employee’s digital File Cabinet.)

The COBRA Qualifying Event Letter is the notice sent when an employee/dependent experiences a qualifying event. This letter explains a qualified beneficiary’s COBRA rights as well as detailing the cost for coverage and the enrollment procedures. Anytime you remove someone from the insurance plan, you should examine if a qualifying event has occurred. If so, you need to send a Qualifying Event Letter. To produce the Qualifying Event Letter in the software, click the File Menu followed by the New COBRA Qualifier option. Enter the information on both the employee and covered dependents. (If the employee elected not to cover his/her dependents on any group plans, do not enter them into the system.) Once completed, the Things-to-Do list will state "Send DOL Qualifying Event Letter to . . .” Double click on that line in the list and the letter will be produced, importing the information specific to the qualified beneficiary. This notice must be sent within forty-four days of the later of the qualifying event date or the date coverage is lost. (Employers using a Third Party Administrator must provide notice within thirty days to the TPA and then the TPA has fourteen days to produce and send the letter.)

The Conversion Notification explains a qualified beneficiary's right when they lose coverage at the end of their COBRA term. Not all plans offer a conversion right and the appropriate box should be checked under the insurance plan information screen. If your plan offers a conversion privilege, the system will track a COBRA Participant's coverage and 180 days prior to the end of their COBRA time frame, a line in the Things-to-do box will advise you to send this notification. A conversion policy is an individual plan whereby the employee/dependent does not have to qualify (by medical underwriting) for coverage. Usually, conversion policies are age-rated and have higher rates than standard individual plans. We have seen a trend of insurers to eliminate conversion plans after the passage of the Affordable Care Act which provides plans with no pre-existing condition limitations.

As insurance plans renew, they have different monthly premiums. Plan Administrators are required to notify Participants of the new rates and their rights during Open Enrollment. Participants should be granted the same rights as “similarly-situated” active employees. Therefore, if active employees are allowed to change, add or terminate plans, Participants should be allowed the same rights. During Open Enrollment, most plans offer the ability to add/remove dependents. COBRA Participants should be offered this right as well but any added dependents added do not receive the rights of qualified beneficiary. To produce Open Enrollment letters in the software, click the “Produce Open Enrollment Letters” under the Events Menu. Enter the renewal date, select the plans the Participants are eligible followed by selecting all the participants. Lastly, enter the date you need the Enrollment Forms from the Participants and click the Print button.

If a Participant sends a payment that is short by an “insignificant” amount, Plan Administrators are required to notify the Participant and make arrangements to make up the payment. The law defines a payment being “insignificantly” short if you receive a minimum of 90% of the monthly premium when the premium is less than $500. For monthly premiums over $500, if the payment is short by $50 or less than it is considered “insignificant.” Plan Administrators are allowed to accept the check as payment in full or send a notice detailing the short payment. The software will notify the user when a payment is short by an insignificant amount and places an item in the Things-to-do list to send the letter.

The Unavailability of COBRA notification is sent to former qualified beneficiaries who are not eligible to continue under COBRA. For example, a spouse contacts the Plan Administrator ninety days after his/her divorce of their desire to continue coverage. The law provides sixty days for the qualified beneficiary to notify the Plan Administrator; therefore the person did not meet the deadline and have become ineligible for continuation coverage. In the past, the individual would be under the assumption they had coverage (until they submitted a claim and it was denied). For this reason the Department of Labor (DOL) requires Plan Administrators to send a notification explaining they were not re-activated and they do not have coverage. To create this notification, select FILE/Other Unique Files/Individual Ineligible for COBRA/New File. Enter the individual’s information and save. The Things-to-do box will notify you to send the Unavailability of COBRA notice.

In the event you are removing a qualified beneficiary from the group plan (voluntarily or not) prior to the end of their COBRA time frame, the 2004 Final Regulations require you send a termination notice. The software has always produced these notifications and you will be prompted in the Things-to-do box after terminating their coverage. Produce the letter and send as soon as possible (because time frames will vary based upon the type of termination experienced). If the employer is terminating one or more group health plans without replacing them, COBRA Participant’s should be notified. Since the facts of this form of plan termination differ among employers, the system will NOT produce a template letter. Plan Administrators will be responsible for creating and distributing a notice.

COBRA Acceptance - The natural progression of events is Active employees and/or covered dependents become qualified beneficiaries who then become COBRA Participants (when they agree to pay for premiums for continuation coverage). As part of the COBRA Qualifying Event Letter, a Summary and Election Form is provided so the qualifier may notify the Plan Administrator of their desire to continue coverage. If you receive this form or are contacted directly, you should have them complete a COBRA application for the insurance carrier(s) and notify the software so it may set-up a billing account. Qualifiers have sixty days from the later of date they lose coverage or the date on the Qualifying Event Letter to notify you of their desire to accept COBRA.

Since COBRA coverage is continuation coverage, you must add them back onto the group plan with no lapse in coverage. It is recommended you do not reinstate coverage until you have received the first premium payment. This could mean going back a few months to retro-actively add them back onto the plan(s). There is one exception when you would not retro-actively enroll the qualifier and that is when the employee removes a dependent from the plan "in anticipation of a future qualifying event." The most common situation is when an employee removes a spouse and later they are divorced. In that situation, you would offer COBRA to the spouse effective on the date of the divorce.

The most important procedure with COBRA administration is to document or have a paper trail of all COBRA-related events. A 2006 court case demonstrated the importance of maintaining a copy of sent notifications (which the software stores in its digital file cabinet) as well as a log detailing all notifications sent, when they were placed in the mail and have the administrator initial it was mailed. The software has a Proof of Mailing Form that should be completed on a daily basis and maintained in a log book. Another form of proof is to scan the postmarked envelope and save the copy to the qualified beneficiary file cabinet.

Q: Are Participants required to pay monthly premiums?
A: Once a qualifier elects COBRA and becomes a participant, they are required to make payments to your organization. Premiums are based upon the group rates your firm is charged (plus a two percent administrative fee to help cover postage/administrative costs). The participant is required to make payments in a timely fashion. They have a forty-five day grace period to make their initial premium payment. Thereafter, they have a thirty-day grace period. If they do not pay within these time frames, you may terminate their coverage. The software tracks payments and notifies you when someone has not paid in a timely fashion. Once notified, you should prepare the termination notice and then terminate them from the plan effective the last day premiums were paid through. You will want to make sure you notify the insurance companies as soon as possible because most of them have implemented a maximum retro-termination policy, only allowing you to receive premium credits back sixty.

There will be times when participants will not pay you prior to the company submitting group premiums to the insurance carriers. If you have not received COBRA payments, it is recommended you do not pay the carrier for their premiums.

Q: What is a disability extension?
A: If a qualified beneficiary is disabled on a date that is earlier than the 61st day under COBRA and later considered “disabled” by Social Security Administration (SSA), the law provides for that individual and all others covered under the same policy to extend their coverage from eighteen to twenty-nine months. To receive the extension, qualified beneficiaries must provide the SSA determination to the Plan Administrator within 60 days of the notice’s date and prior to the end of the 18 month continuation period. This eleven month extension comes with a price. Employers may (or may not) charge a fifty percent administration fee during this extension. The software will make the necessary change to premiums, automatically.

Q: What is a Multiple Qualifying Event?
A: If an employee initially experiences a termination of employment or reduction in work hours and later a covered dependent experiences another (or “multiple”) qualifying event, the dependent should be offered the right to continue up to thirty-six months from the original COBRA start date. In the software, click the Events Menu followed by the Multiple Qualifying Event option. Enter the information on the qualifier and the system will create a new billing account for them and produce a letter explaining their rights. (If employment termination follows a reduction in work hours, the law does not consider it a multiple qualifying event; therefore the qualified beneficiary would only receive the eighteen months continuation coverage offered upon the reduction of work hours.)

This is a very brief summary of COBRA. The actual law is hundreds of pages and is very complex. We appreciate your confidence in our software and hope that we can continue to provide you with useful information to assist with maintaining your COBRA compliance. Our goal is to keep you informed about COBRA, proposed legislation and the operation of our software. If you have any recommendations as to content of these monthly newsletters or software enhancements, feel free to email us at help@csisupport.com.

Correcting Failures when Offering COBRA

When a COBRA administrator discovers a failure to offer COBRA coverage they should take immediate steps to correct the mistake to avoid such penalties as ERISA ($110 per day), IRS excise tax and lawsuits.

Code Section 4980B imposes an excise tax on failures unless an employer has not received an audit letter from the IRS and the failure is due to reasonable cause, as opposed to willful neglect, and remedied within 30 days after any person liable for the tax is aware of the failure to comply with COBRA. A COBRA failure is considered corrected when retroactively undone to the degree that any affected beneficiary is restored to the same financial position as the beneficiary would have been had the failure not taken place. The code requires that the qualified beneficiary is offered the election of the most favorable coverage with regards to the medical expenses incurred after the failure occurred. In this case, the term beneficiary also implies reference to the qualified beneficiary’s estate.

Keep in mind the employer is liable for all expenses incurred by the employee due to the employer’s failure to comply with COBRA. This means that according to IRS’s COBRA Examination User’s Guide it may involve determining whether the complaining individual had been “made whole.”

Judicial standards as reported in past decisions in terms of assessing retroactive corrections of COBRA failures offer valuable insight as to what constitutes proper correction of COBRA failures. Generally the corrections involve providing:

  1. the benefits that should have been paid to a qualified beneficiary for already-incurred medical expenses, less applicable COBRA premiums;
  2. coverage for remaining portion of the maximum coverage period; and
  3.  attorneys’ fees and interest.

As for implementing measures to correct failures there are no simple solutions that will work in every situation. However, the following options appear to satisfy the Code’s requirements that qualified beneficiaries are to be restored to the position they would have been in if COBRA coverage had been properly offered: In the event that a plan administrator has failed to offer COBRA coverage the notice should be provided. In the event the notice was inadequate it should be provided again – one possibility is to provide the notice again with open enrollment materials. If the qualified beneficiary is within the election period and it is discovered that the election notice was not sent, then the plan administrator should re-send the notice. However, if it is outside the election period and there is solid proof that the notice was sent to the last known address, then the plan administrator may decide not to provide a second notice. In regards to a notice of unavailability or termination notice, even though these notices basically inform the qualified beneficiaries that they will not have coverage, a new one should be provided if missed. Providing a notice could stop the penalty period from running.

When retroactive COBRA coverage is necessary, offer to pay all covered claims that have been charged to date, or if earlier, the expiration of the applicable maximum coverage period whether it be 18,29, or 36 months from the qualifying event. Keep in mind, however, that each qualified beneficiary should be given the choice to elect the period of retroactive COBRA coverage. For example, if the employee wants to end coverage prior to the expiration of the full period, the employer cannot demand payment for the full retroactive period. Also, ensure that all beneficiaries are clearly notified that this offer is for retroactive coverage only as it can easily be assumed that they are being offered prospective coverage.

If the COBRA election notice is very late or the maximum coverage period has already expired, you may consider offering some sort of prospective coverage. While this offer would seem to go beyond what COBRA requires, it may mitigate complaints that necessary medical attention was passed up due to lack of proper coverage being offered; it can be argued that retroactive coverage does nothing to make up for lost health care treatment.

As for collecting the initial payment premium, there are conflicting arguments - be careful about demanding one lump sum. There has been at least one case where the qualified beneficiary was still allowed to make monthly payments while the employer was required to provide the full retroactive coverage. On the other hand, there have been at least two court cases to permit the request for a lump sum although neither case directly considered the question. The Ninth Circuit has upheld a decision that required payment for retroactive premiums to be collected in a lump sum (Chaganti v. Ceridian Benefits Servs., Inc., 2006 WI. 3431753 (9th Cir. 2006). But it should also be noted that the 1999 final IRS COBRA regulations provide that plans may permit qualified beneficiaries to make payments at other intervals such as weekly, monthly, quarterly and semi-annually so it could be easy to assume this requirement would also hold true in the case where a COBRA notice was late due to the failure of a plan administrator. In one court case, the employer’s demand for a lump sum payment was upheld, however large statutory penalties were awarded to the qualified beneficiary.

In the case of conversion coverage that might have been elected if not for the failure to offer, consider offering conversion coverage beginning with the expiration of COBRA coverage if permitted by insurance carrier. Also be careful not to limit claims filing deadlines for expenses incurred before the correction. And in the case of a qualified beneficiary becoming covered by another group health plan, according to one court case, it concluded that the plan should still offer COBRA coverage as a curative matter even if this means the opportunity for dual coverage. Until the plan administrator corrects the election notice failure, the fact that the qualified beneficiary has become covered under another plan, does not relieve the obligation to offer COBRA coverage.

In any event, it is probably not wise to use standard election notices and forms in the case of a correction, especially one that is very late. It would be best to customize written notices for the specific situation to avoid confusion and future litigation. Ultimately, if a qualified beneficiary refuses the appropriate offer for retroactive coverage they lose any claim for COBRA.
For those Insured or Self –Insured plans with Stop-loss Insurance the employer needs to work with the insurer to make sure they will provide the coverage that is being offered. Also, an employer that is held liable for violating COBRA, should investigate whether this could be covered under its liability policy, and the decision to correct the failure should be made in accordance with the liability policy’s notice provisions and guidance.

In the case of withdrawing offers of COBRA coverage the plan administrator should look at the strengths of their position based on a review of COBRA documents such as the election notice, the initial notice, the SPD, the plan document, the plan’s insurance contract and any other pertinent communication documents. Looking at past practices will also be critical as this alone can determine the obligations even when the law does not. And lastly, look at the facts. Were specific representations made to the claimant? Should the claimant have understood the coverage was mistakenly offered? Were there any misrepresentations by the claimant in order to gain coverage? It is advisable to seek counsel to make certain the legality of the decision to withdraw coverage retroactively is substantiated.

Gross Misconduct Can Void COBRA Rights

In the court case, Gilson v. Pennsylvania State Police, 2016 WL 1237351 (W.D. Pa., March 30, 2016), a federal district court in Pennsylvania ruled that the plaintiff, William Gilson, was appropriately denied the option of COBRA coverage due to his termination of employment for “gross misconduct.” Although the term “gross misconduct” is not clearly defined in COBRA statute, therefore being rather ambiguous to affirm, courts generally look to state unemployment law in making their determination of whether a termination occurred by actions that escalated to the level of “willful misconduct.” In this case, state trooper Gilson’s actions of sexual misconduct and deception were found to be just cause for the negation of his COBRA rights.

The facts of the case are as follows: As an employee of the Pennsylvania State Police (PSP) Gilson, along with several other officers, were called to an incident in August of 2009 where a female crisis service worker was also present. She alleged that Gilson touched her inappropriately, claiming he placed his arm around her waist and pulled her toward him. There was at least one other officer that corroborated this violation. Disciplinary and arbitration proceedings ensued which found that Gilson lied several times about the facts of his actions. Consequently, it was determined that Gilson had indeed violated the PSP’s regulations prohibiting police officers from engaging in sexual misconduct/harassment and was thereby given a notice of termination in November of 2010. After an arbitrator upheld PSP’s decision, Gilson was terminated on May, 2, 2011 and given no option of COBRA coverage by PSP because of his gross misconduct.

Gilson decided to sue PSP as well as several individuals, claiming his COBRA rights under the Public Health Service were violated. Because the COBRA statute does not contain an actual definition of what “gross misconduct” means, the court chose to take the lead from the standards set by the state in terms of unemployment compensation. So in this case, the court noted that under Pennsylvania law discharges resulting in willful misconduct connected with work disqualifies an individual from receiving unemployment benefits. It was therefore determined that for COBRA purposes, Gilson’s actions would also constitute “willful misconduct” thereby taking away his COBRA rights.
Gilson fought back. Ironically, in this case, he was actually awarded state unemployment compensation, therefore bringing into question whether his actions did comprise the willful misconduct standards. Gilson argued that the unemployment office determined that the August 2009 incident “was not sufficiently related in time” to the notice of termination in November 2010. Because of that, the unemployment office could not say for certain that his termination was caused by the PSP rule violation. However, the court noted that just because the unemployment office may have had a hard time with the timing issue, it did not rule out the fact that Gilson’s inappropriate physical contact and “serious act of deception” was deemed “gross misconduct.” Subsequently, the court ruled in favor of the defendants.

In this author’s opinion, employers should be very cautious when considering a gross misconduct decision. Because of the lack of a clear-cut definition in the COBRA statute, this a judgment call that should be well thought out and documented to avoid costly litigation. Remember laws vary from state to state. Not all legal verbiage in one jurisdiction can be applied across the board. Taking a good look at relevant cases in your locality may offer helpful guidelines.

FMLA and COBRA

The connection between COBRA and Family and Medical Leave Act (FMLA) can be confusing. Plan administrators need to understand that although going on leave under FMLA does not necessarily trigger a COBRA qualifying event, the failure of an employee to return to work after exhausting his FMLA leave could create a qualifying event if it causes a loss of coverage. An employer is not obliged to extend the benefits of FMLA even if the individual remains an employee during sick or short-term disability leave.

In a recent case a firefighter was not able to return to work after exhausting his FMLA leave although he remained an employee because of the sick leave hours he accumulated after years of employment. He filed a lawsuit against the City claiming the City violated COBRA when it cancelled his insurance benefits.
The case is Neal v. City of Danville, Virginia, 2014 WL 7011123 (W. D. Va. Dec. 11, 2014)

Barry Neal, a firefighter for the City of Danville, was injured on Feb. 1, 2013 in a non-work related accident. Neal used about 2,000 hours of paid sick leave that he had accumulated since he began working for the City of Danville in April 1987. Contrary to Neal’s choice, the city put Neal on FMLA on Feb. 15, 2013, although he remained covered under the City’s health plan as he continued to use his accrued sick leave hours.

The City sent Neal a COBRA election notice after he exhausted his 12 week FMLA and he was still unable to return to work. The City told him his health insurance benefits would be cancelled according to the City’s FMLA policy which states “in all cases, at the point of FMLA leave exhaustion, the employee’s benefits will be subject to COBRA and/or direct billing, as applicable, based upon the benefit.” Neal elected COBRA after he exhausted his FMLA leave and paid approximately $1,872 in COBRA premiums.

On July 17, 2013 Neal was medically cleared to return to work and the City reinstated his group health benefits. Neal then decided to sue the City stating that since no qualifying event occurred, the city violated COBRA when they cancelled his benefits. The City argued that a qualifying event did occur – they felt that Neal’s use of sick leave was a reduction in work hours that he actually worked, thereby creating a qualifying event and a loss of coverage.

The court stated the reduction in work hours applies in this case since COBRA states that a reduction in work hours occurs, “whenever there is a decrease in the hours that a covered employee actually works.” In Neal’s case, after he exhausted his FMLA leave, the number of hours he worked decreased to zero. Also the court stated that the City’s policy clearly states that an employee’s group health insurance benefits be terminated if the employee fails to return to work following 12 weeks of FMLA leave. The court decided that both of these facts support the City’s action in providing Neal with COBRA continuing coverage. The court stated that Neal’s claim that paid sick leave is equivalent to FMLA leave did not hold up, noting that COBRA regulations state that absence from work for any reason “other than due to leave that is FMLA leave” is a reduction in work hours. The court contended that FMLA regulations clearly provide that an employer is not obligated to extend the benefits of FMLA if it has a greater leave policy than mandated by the act. It was determined that the City was under no legal obligation to extend the benefits elemental to FMLA leave to Neal’s paid sick leave in excess of twelve weeks.

In this author’s opinion: This case shows that an employer is not obligated to extend FMLA leave benefits beyond twelve weeks even when an employee has accumulated paid sick leave. The fact that the employee remained on sick leave until returning to full time employment did not affect the result. It is important for employers to make sure their leave policies reflect the connection between COBRA and other extended coverage such as FMLA.

Issues with Insurance Carriers

The following questions are examples of difficult situations that often arise between major insurers and employers along with possible solutions for a positive outcome:

What if the Insurer is denying COBRA?
First of all, the employer should confirm that the COBRA election notice was sent within the proper time frame. Keep in mind the COBRA statute states, “the employer of an employee under a plan must notify the plan administrator of a Qualifying Event with 30 days of the Qualifying Event.” Furthermore, the statute also requires the plan administrator to notify any qualified beneficiary, with respect to an event, within 14 days of the date on which the employer notifies the plan administrator of the date.

In the event that the employer failed to send the election notice within the proper time frame then the insurer can deny COBRA coverage. This means the employer will become self-insured for any and all claims made during the full 18, 29, or 36 month COBBRA coverage period. If confirmation can be made that the election notice was sent in a timely manner and everything was done correctly then the following steps should be taken:

  1. Obtain the specific reason the insurer is denying coverage
  2. Provide documentation of your COBRA compliance along with applicable legal guidance. These can be found in either the notice regulations issued by the U.S. Department of Labor (DOL) in 2004, or the COBRA regulations issued by IRS in 1999 and 2001.
  3. Examine the COBRA language in the insurance contract and policy – specifically find the part that outlines what obligates the insurer to comply with COBRA.

What if the Insurer is denying an Extension of Coverage?
The first thing to do is make sure the qualified beneficiary was properly notified of their 60-day responsibility to notify the plan of a secondary event. The notice must include who should be notified and in what manner. Remember that until a qualified beneficiary has been notified the “clock does not start ticking.”
In order to ensure the extension will be accepted, the employer should first obtain the specific reason for the denial from the employer and then:

  1. Submit documentation proving the proper time frame was met
  2. Submit documentation received from the qualified beneficiary
  3. Provide the DOL’s 2004 final regulations.

In summary, timing is of the utmost importance when dealing with COBRA. In this author’s opinion employers must work in conjunction with insurance carriers to ensure all rules and regulations are followed. Otherwise, the employer will run the risk of becoming self-insured which could be potentially devastating financially.

How does COBRA and Medicare Interact?

COBRA Solutions has been answering questions regarding COBRA since 1991 and we are often asked, “What is the most common question regarding COBRA?” It is actually a very easy question to answer; how Medicare and COBRA interact. This COBRAinReview will discuss COBRA and Medicare and how to administer COBRA correctly.

There are six situations where COBRA and Medicare interact and have been interpreted completely different throughout COBRA’s existence. Keep in mind; you cannot use logic when discussing COBRA and Medicare’s interaction. You also will have a difficult time finding confirming information on the internet. Quite frankly, there are many situations where administrative procedures don’t seem logical. Let’s examine those six COBRA and Medicare interactions.

  1. Employee’s Medicare Entitlement While Continuing to Work

    Not all employees retire at age 65. Many want to continue working but over the years the cost for group coverage has increased to the point many Medicare Entitled employees wish to drop their group coverage and obtain a Medicare Supplement Insurance plan. (And, due to MSP rules, employers may not terminate employee coverage because of Medicare Entitlement.) Although it was once considered a COBRA Qualifying Event for covered dependents, today’s interpretation is that the employee would be voluntarily cancelling his/her group insurance and therefore dependents should not be offered COBRA because coverage is not “involuntarily” lost.

    In a situation where an employee voluntarily removes him/herself from a plan, it is recommend to see if they have dependents on their plan. Prior to contacting the insurer to remove the employee, have a conversation to let them know their dependents will be terminated along with them and will not be offered COBRA. Some employers will have the employee sign a form stating he/she understands this consequence if they still wish to cancel coverage.

    In the COBRA software, you would enter this individual under File > Other Unique Files > Active Employee Voluntary Removal From Group Plan > New File. Enter the employee’s information and the system will place the Voluntary Removal Letter in the Things-to do list. Although not required by COBRA, it is recommended you send this notification so dependents know their coverage has been cancelled.

  2. Medicare as a Multiple Qualifying Event

    Once a COBRA Participant has started on COBRA and then becomes Entitled to Medicare, has a “multiple COBRA Qualifying Event” occurred? We know that Medicare Entitlement is a reason for COBRA termination but what about covered Qualified Beneficiaries? Prior to 2004, it was deemed as a qualifying event and covered dependents were offered up to thirty-six months of continuation coverage. But with Rev. Ruling 2004-22, 2004-10 I.R.B. 553, the Internal Revenue Service determined that a COBRA Participant’s Medicare Entitlement will rarely be considered a multiple qualifying event. They stated that under MSP (Medicare Secondary Payer) rules, group health plans are unable to terminate covered dependent’s coverage; therefore there they should not experience a loss of coverage.

    If a COBRA Participant becomes Entitled to Medicare, you will want to remove them from continuation coverage. Follow the steps below in the software to correctly remove them:

    a) Under the Events menu, select the “Remove Individual from Participant’s Plan > New File.”;

    b) Select the COBRA Participant subscriber file from the dropdown list;

    c) Select the individual that became Entitled to Medicare;

    d) Verify the Participant’s address and enter the last day the individual should be on the plan;

    e) Select the plan(s) that the individual should be removed from; and

    f) Click the Ok button.

    If the system cannot automatically determine, you may then be asked what tier/coverage type the remaining COBRA Participants will have after the removal of the individual. After the removal you will want to verify the billing information. The system will prompt you to send a notification informing the individual of their removal from the plan in the Things-to-do list. Double click on it and send the notification via USPS first class mail. Lastly, if there was a tier/coverage type change, you will want to send new coupons (or a letter detailing the new rates) to the remaining covered individuals.

  3. “Special Medicare Rule”

    Just when you thought you knew everything about how COBRA and Medicare interact, ERISA Section 602(2)(A)(vii) [and Treasury Regulation Section 54.4980B-7 Q?A -4(d)(1) ] changes everything. These sections of the law state the if an active employee is terminated (voluntarily or involuntarily) or experiences a reduction in work hours where there is a loss of coverage within 18 months of the employee’s Entitlement to Medicare;

    a) The employee should be offered the right to continue coverage for 18 months; but
    b) Covered dependents should be offered thirty-six months calculated from the date of the employee’s Entitlement to Medicare.

    The COBRA Administration Manager reviews the age of the employee at the time of the Qualifying Event and notifies the user when the employee is terminated or loses coverage to a reduction in work hours. The system will then create a COBRA Participant file for the employee providing 18 months of coverage and another file for the dependents. The dependent’s COBRA end date will be calculated by adding thirty-six months to the employee’ Medicare Entitlement date. You will notice that the system will change the number of months for COBRA to match the end date that was calculated. This number could be calculated to be between 19 and 36. Do not change it or it will change the correct COBRA end date.

  4. COBRA Participant Becomes Entitled to Medicare

    As we explained earlier, Medicare Entitlement is rarely considered a multiple qualifying event. When either an employee (or dependent of) is effective on COBRA and later becomes Entitled to Medicare, that individual “can” be terminated from continuation coverage. We are using the word “can” be terminated because by law they should be terminated from continuation coverage but we have found many Administrators allow these individuals to continue ancillary plans (i.e. dental, vision, etc.) if the carrier agrees to continue coverage.

    Your COBRA software will notify you when individuals reach age 65 and become Entitled to Medicare. Please follow the instructions found under item #2 to remove them from continuation coverage.

  5. Medicare Entitled Active Employee Experiences Qualifying Event

    Should an active employee age 65+ (who is enrolled under Medicare) be offered COBRA when they are terminated or lose coverage due to reduced work hours? In the previous paragraph we described how individuals should be remove when they are enrolled on COBRA and become eligible for Medicare so it only makes sense that you would not offer a Medicare covered employee COBRA when they experience a qualifying event. WRONG. The law states that the employer-sponsored plan may cover items that Medicare does not. For this reason, employers must offer these individuals COBRA continuation.

  6.  COBRA Participant Receives “Disability Extension”

     Although not directly related to Medicare, the reason for allowing a disabled COBRA Participant an additional eleven months of continuation coverage is to provide time to obtain Medicare. If a Qualified Beneficiary is deemed disabled prior to their sixtieth day on COBRA, notified the Administrator within sixty days of Social Security Administration’s (SSA) Disability Determination and provides that determination prior to the end of their 18 months on COBRA, they should be offered an eleven month Disability Extension. All members of the family unit should be granted the extension as well. If the disabled individual is no longer considered by SSA or becomes Entitled to Medicare, they may be removed from the plan.

Hopefully this description of COBRA and Medicare interaction will aide you in your administration. Please refer to it when you come across one of the above scenarios. If you are still unsure, feel free to call COBRA solutions for assistance.

COBRA Training 101

As we enter a new year, we receive numerous phone calls regarding COBRA administration procedures. And with the addition of many new users, our staff feels it important to go through the basics of COBRA administration so everyone has a clear understanding as to "what needs to be done when" and your administration responsibilities. We know that this may be elementary for many of our seasoned professionals but we still recommend that you take the time to read through it.

• What is COBRA?
• What is a qualifying event?
• What are the required notifications?
• What about COBRA Premiums?
• What is a disability extension?
• What is a Multiple Qualifying Event?

Q: What is COBRA?
A: In July of 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act, commonly known by its acronym COBRA. In the 1980's (as with today), the population of uninsured Americans was growing at an alarming rate. Congress determined that many of these uninsured individuals have some relationship to an employer. Their thought was to create legislation that would allow employees and covered dependents the ability to temporally continue their group coverage for a reasonable amount of time when they experience a "qualifying event."

Q: What is a qualifying event?
A: There are two types of qualifying events; ones that affect employees and others that affect an employee's dependents. The two qualifying events that affect employees are (1) Termination of Employment (for reasons other than "gross misconduct") and (2) Reduction in Work Hours. To be considered a qualifying event, the employee must have a loss of coverage. (Example: If an employee has a reduction in work hours but is still eligible to continue under the group plans, there is no qualifying event.) Employees experiencing one of these events are eligible to continue coverage (for themselves and their covered dependents) for up to eighteen months under federal COBRA. (Some states such as California, New York, Connecticut and Texas have extended the maximum time frame.)

Dependents have their own qualifying events; Death of the Employee, Divorce or Legal Separation, Employee's Medicare Entitlement and Dependents that no longer meet the definition of a "Dependent" under the group insurance contract. Covered dependents that experience these qualifying events (in most cases) will experience a loss of coverage and should be offered the right to continue for up to thirty-six months.

Members losing coverage upon experiencing one of these events is classified as a "qualified beneficiary." Each qualified beneficiary has independent rights under COBRA. This means a spouse or dependent child may continue singularly on the group plan as if they were an employee of the company. They may only enroll on the plan(s) they were enrolled on the day prior to the qualifying event (unless they move from a specific service area and another plan is available). At Open Enrollment time, the qualified beneficiary has the same rights as "similarly-situated active employees" and may add/change plans, even add dependents. Dependents added during open enrollment do not receive the same rights as a qualified beneficiary but merely may continue coverage with the qualified beneficiary. In the software, we refer to qualified beneficiaries as "qualifiers."

Q: What are the required notifications?
A: COBRA requires employers (with twenty or more employees on at least half of the business days in the previous calendar year) to provide written notifications to inform employees and their covered dependents of their rights to continuation coverage. The law requires seven notices; the General Notice, Qualifying Event Notice, notice of Conversion rights under eligible group plans, Open Enrollment letter, Short Payment Letter, Unavailability of COBRA notice and a Termination letter when the qualified beneficiary terminates coverage prior to the end of his COBRA term. All notifications may be sent by USPS first class mail. (Administrators are not responsible to verify the qualified beneficiary receives the notice but merely prove it has been sent to the last known address.) The General Notice is designed to be sent to newly-hired employees as they enroll on one or more of the group plans. This notification explains COBRA and the steps necessary for notifying the Plan Administrator of a qualifying event. This notice should be sent to both the employee and covered spouse. Many insurance companies include the General Notice in their certificate of coverage but it is recommended a notice be sent via mail. COBRA requires the General Notice be sent within ninety days from the date coverage becomes effective. To produce this letter in the software, click File and Newly Hired (Active) Employee and enter the employee's information. Double click in the Things-to-Do box on the line that states "Send DOL General Notice to . . ." and the letter will be produced. Since all employees should have been provided this notification at some time; if you cannot prove they receive it you should send another and place a copy in their file. (Once printed, the letter will be saved in the employee’s digital File Cabinet.)

The COBRA Qualifying Event Letter is the notice sent when an employee/dependent experiences a qualifying event. This letter explains a qualified beneficiary’s COBRA rights as well as detailing the cost for coverage and the enrollment procedures. Anytime you remove someone from the insurance plan, you should examine if a qualifying event has occurred. If so, you need to send a Qualifying Event Letter. To produce the Qualifying Event Letter in the software, click the File Menu followed by the New COBRA Qualifier option. Enter the information on both the employee and covered dependents. (If the employee elected not to cover his/her dependents on any group plans, do not enter them into the system.) Once completed, the Things-to-Do list will state "Send DOL Qualifying Event Letter to . . .” Double click on that line in the list and the letter will be produced, importing the information specific to the qualified beneficiary. This notice must be sent within forty-four days of the later of the qualifying event date or the date coverage is lost. (Employers using a Third Party Administrator must provide notice within thirty days to the TPA and then the TPA has fourteen days to produce and send the letter.)

The Conversion Notification explains a qualified beneficiary's right when they lose coverage at the end of their COBRA term. Not all plans offer a conversion right and the appropriate box should be checked under the insurance plan information screen. If your plan offers a conversion privilege, the system will track a COBRA Participant's coverage and 180 days prior to the end of their COBRA time frame, a line in the Things-to-do box will advise you to send this notification. A conversion policy is an individual plan whereby the employee/dependent does not have to qualify (by medical underwriting) for coverage. Usually, conversion policies are age-rated and have higher rates than standard individual plans. We have seen a trend of insurers to eliminate conversion plans after the passage of the Affordable Care Act which provides plans with no pre-existing condition limitations.

As insurance plans renew, they have different monthly premiums. Plan Administrators are required to notify Participants of the new rates and their rights during Open Enrollment. Participants should be granted the same rights as “similarly-situated” active employees. Therefore, if active employees are allowed to change, add or terminate plans, Participants should be allowed the same rights. During Open Enrollment, most plans offer the ability to add/remove dependents. COBRA Participants should be offered this right as well but any added dependents added do not receive the rights of qualified beneficiary. To produce Open Enrollment letters in the software, click the “Produce Open Enrollment Letters” under the Events Menu. Enter the renewal date, select the plans the Participants are eligible followed by selecting all the participants. Lastly, enter the date you need the Enrollment Forms from the Participants and click the Print button.

If a Participant sends a payment that is short by an “insignificant” amount, Plan Administrators are required to notify the Participant and make arrangements to make up the payment. The law defines a payment being “insignificantly” short if you receive a minimum of 90% of the monthly premium when the premium is less than $500. For monthly premiums over $500, if the payment is short by $50 or less than it is considered “insignificant.” Plan Administrators are allowed to accept the check as payment in full or send a notice detailing the short payment. The software will notify the user when a payment is short by an insignificant amount and places an item in the Things-to-do list to send the letter.

The Unavailability of COBRA notification is sent to former qualified beneficiaries who are not eligible to continue under COBRA. For example, a spouse contacts the Plan Administrator ninety days after his/her divorce of their desire to continue coverage. The law provides sixty days for the qualified beneficiary to notify the Plan Administrator; therefore the person did not meet the deadline and have become ineligible for continuation coverage. In the past, the individual would be under the assumption they had coverage (until they submitted a claim and it was denied). For this reason the Department of Labor (DOL) requires Plan Administrators to send a notification explaining they were not re-activated and they do not have coverage. To create this notification, select FILE/Other Unique Files/Individual Ineligible for COBRA/New File. Enter the individual’s information and save. The Things-to-do box will notify you to send the Unavailability of COBRA notice.

In the event you are removing a qualified beneficiary from the group plan (voluntarily or not) prior to the end of their COBRA time frame, the 2004 Final Regulations require you send a termination notice. The software has always produced these notifications and you will be prompted in the Things-to-do box after terminating their coverage. Produce the letter and send as soon as possible (because time frames will vary based upon the type of termination experienced). If the employer is terminating one or more group health plans without replacing them, COBRA Participant’s should be notified. Since the facts of this form of plan termination differ among employers, the system will NOT produce a template letter. Plan Administrators will be responsible for creating and distributing a notice.

COBRA Acceptance - The natural progression of events is Active employees and/or covered dependents become qualified beneficiaries who then become COBRA Participants (when they agree to pay for premiums for continuation coverage). As part of the COBRA Qualifying Event Letter, a Summary and Election Form is provided so the qualifier may notify the Plan Administrator of their desire to continue coverage. If you receive this form or are contacted directly, you should have them complete a COBRA application for the insurance carrier(s) and notify the software so it may set-up a billing account. Qualifiers have sixty days from the later of date they lose coverage or the date on the Qualifying Event Letter to notify you of their desire to accept COBRA.

Since COBRA coverage is continuation coverage, you must add them back onto the group plan with no lapse in coverage. It is recommended you do not reinstate coverage until you have received the first premium payment. This could mean going back a few months to retro-actively add them back onto the plan(s). There is one exception when you would not retro-actively enroll the qualifier and that is when the employee removes a dependent from the plan "in anticipation of a future qualifying event." The most common situation is when an employee removes a spouse and later they are divorced. In that situation, you would offer COBRA to the spouse effective on the date of the divorce.

The most important procedure with COBRA administration is to document or have a paper trail of all COBRA-related events. A 2006 court case demonstrated the importance of maintaining a copy of sent notifications (which the software stores in its digital file cabinet) as well as a log detailing all notifications sent, when they were placed in the mail and have the administrator initial it was mailed. The software has a Proof of Mailing Form that should be completed on a daily basis and maintained in a log book. Another form of proof is to scan the postmarked envelope and save the copy to the qualified beneficiary file cabinet.

Q: Are Participants required to pay monthly premiums?
A: Once a qualifier elects COBRA and becomes a participant, they are required to make payments to your organization. Premiums are based upon the group rates your firm is charged (plus a two percent administrative fee to help cover postage/administrative costs). The participant is required to make payments in a timely fashion. They have a forty-five day grace period to make their initial premium payment. Thereafter, they have a thirty-day grace period. If they do not pay within these time frames, you may terminate their coverage. The software tracks payments and notifies you when someone has not paid in a timely fashion. Once notified, you should prepare the termination notice and then terminate them from the plan effective the last day premiums were paid through. You will want to make sure you notify the insurance companies as soon as possible because most of them have implemented a maximum retro-termination policy, only allowing you to receive premium credits back sixty.

There will be times when participants will not pay you prior to the company submitting group premiums to the insurance carriers. If you have not received COBRA payments, it is recommended you do not pay the carrier for their premiums.

Q: What is a disability extension?
A: If a qualified beneficiary is disabled on a date that is earlier than the 61st day under COBRA and later considered “disabled” by Social Security Administration (SSA), the law provides for that individual and all others covered under the same policy to extend their coverage from eighteen to twenty-nine months. To receive the extension, qualified beneficiaries must provide the SSA determination to the Plan Administrator within 60 days of the notice’s date and prior to the end of the 18 month continuation period. This eleven month extension comes with a price. Employers may (or may not) charge a fifty percent administration fee during this extension. The software will make the necessary change to premiums, automatically.

Q: What is a Multiple Qualifying Event?
A: If an employee initially experiences a termination of employment or reduction in work hours and later a covered dependent experiences another (or “multiple”) qualifying event, the dependent should be offered the right to continue up to thirty-six months from the original COBRA start date. In the software, click the Events Menu followed by the Multiple Qualifying Event option. Enter the information on the qualifier and the system will create a new billing account for them and produce a letter explaining their rights. (If employment termination follows a reduction in work hours, the law does not consider it a multiple qualifying event; therefore the qualified beneficiary would only receive the eighteen months continuation coverage offered upon the reduction of work hours.)

This is a very brief summary of COBRA. The actual law is hundreds of pages and is very complex. We appreciate your confidence in our software and hope that we can continue to provide you with useful information to assist with maintaining your COBRA compliance. Our goal is to keep you informed about COBRA, proposed legislation and the operation of our software. If you have any recommendations as to content of these monthly newsletters or software enhancements, feel free to email us at help@csisupport.com.

Is Your Cafeteria Plan Ready for 2019?

Most employers have been receiving large rate increases over the last several years from their insurance providers because medical trend is over 15%. In many cases, the employer is forced to pass on the increase to employees. One good way to minimize rate increases is to start a Cafeteria Plan. A Cafeteria Plan allows employees to pay for their portion of premiums on a pre-tax basis. This lowers their taxable base, therefore decreasing federal, FICA and most state's taxes. Most employees (depending on their tax bracket) will see that a Cafeteria Plan saves them 20% to 35% of their cost of premiums. Not only does the employee save money but the employer sees a reduction in their FICA and other payroll taxes.

In addition to paying for premiums on a pre-tax basis, employees may set up Flexible Spending Accounts (FSAs) to pay for items not covered by an insurance plan (i.e. deductibles, copays, coinsurance, over the counter medication, etc.) and even Dependent Care expenses. It is a win-win situation; both the employer and employee save money in taxes.

COBRA Solutions offers Cafeteria Plan software that assists employers with the administration of a Cafeteria Plan. Please visit our website at www.cobrasolutions.com for further information and a free 60-day no obligation demonstration version of Cafeteria Plan Manager. It is an outstanding software program that will pay for itself in the first few months, and the savings will continue for years. To see what your firm may save by implementing a Cafeteria Plan, visit our site at https://www.cobrasolutions.com/CafeteriaPlanManager.html and click the "Calculate Your Savings" link.

When should I send a COBRA General Notice?

The COBRA General Notice (formally called the “COBRA Initial Notification”) is letter that is required to be sent to by USPS First Class mail to the employee (and enrolling spouse) within 90 days from their group plan effective date. This seems fairly straight forward but is this the only time I need to send the COBRA General Notice?

First, let’s review the importance of the COBRA General Notice. The document is designed to inform the employee and covered spouse that their employer is a COBRA-mandated employer and describes their rights under federal COBRA law. The following elements are required to be part of the General Notice so if you have edited the software’s model notice, you may want to review the following requirements are included in your notice.

  • The group plan name, address and customer service phone number;
  • A general description of COBRA continuation coverage;
  • The qualified beneficiary’s responsibility to notify the employer of a divorce, legal separation or when a dependent loses their insurance plan “dependent status;”
  • Explains the 11 month disability extension and the requirements to receive the extension; and
  • Mentions the qualified beneficiary’s responsibility to notify the Plan Administrator of a change in address.

COBRA specifies the enrolled employee and spouse receive the COBRA General Notice but does not include children. It is assumed the parents will act as the child’s representative in regards to group health benefits.

Returning to the original question, the following list should be adhered to in deciding when you should send a COBRA General Notice:

  1. Newly-hired employees and enrolling spouse should receive the General Notice within 90 days from their effective date on the group plan;
  2. Groups that pass the threshold of having 20 or more employees on half of the business days in the previous calendar year are required to produce a COBRA General Notice to all enrolled employees and covered spouses;
  3. Newly married spouses should be mailed the COBRA General Notice within 90 days of being added onto the group health plan; and
  4. If COBRA should experience a significant change, all covered employees and spouses should be sent the notice.

Note: Not included in the list above is when an employee enrolls on a new group plan whether it is a newly offered plan or a change in carriers (i.e. changing from Blue Cross to Aetna medical plan). There is conflicting information on whether you need to provide a General Notice to the employee and enrolled spouse in these situations. It is our belief that the law requires group plans (insurance companies) to provide COBRA General Notice information in their Summary Plan Document (SPD), therefore meeting the General Notice requirement when changing plans. We recommend you contact council in regards to whether your group should provide a new COBRA General Notice in these situations.

What should the employer do if it is determine the employee or spouse did not receive the COBRA General Notice? It is recommended the employer send the COBRA General Notice as soon as it is determined the notice was not sent. Why? Because the 60-day notice dead-line for informing the Plan Administrator of events such as Divorce, legal separation or a loss of dependent status will be nullified. So, a spouse may notify the Plan Administrator of one of these events 1 year, 2 years or anytime in the future and the employer will be forced to offer continuation coverage. And, in most cases the insurer will not agree to reinstate the qualified beneficiary leaving the employer to “self-insure” the individual’s claims.

How should the COBRA General Notice be delivered? The Department of Labor has approved USPS First-class, Second-class, Third-class mail, hand-delivery and electronic disclosure. It is recommended the COBRA General Notice be sent by First-class mail. If the Plan Administrator sends the notices second- or third-class mail, return/forwarding postage must be guaranteed and address correction must be requested. Hand-delivery is not recommend unless you have the employee sign a form stating it was received. Electronic disclosure has many requirements and is outside the scope of this article to discuss. Please refer to federal government guidelines for providing information via electronic disclosure.

Many employers have a work force where English is not a first language. Should the employer translate the COBRA General Notice into multiple languages? Although it would be nice and could eliminate confusion in the future, the law does not require the notifications to be provided in the employee’s first language.

Lastly, insurance companies are required to provide COBRA information in the Summary Plan Description (SPD) but in many cases the information provided does not meet the COBRA General Notice requirements. The Department of Labor expressly permits combined SPD and General Notice provided that the covered spouse receives the SPD. Employers should contact their insurance providers to confirm the SPD does meet the General Notice requirements and file a SPD every year to prove compliance.

Handling Cobra Premium Payment Shortfalls

 Perhaps the most common recurring administrative challenge comes from the fact that the amount paid by the qualified beneficiary does not match up with the amount owed. The following true story illustrates this challenge:

A qualified beneficiary accidentally writes his check for $0.02 (two cents) less than the required premium amount for a given month. Although there were attempts by the Plan Administrator to notify the qualified beneficiary of the shortfall, he does not realize his error, therefore does not pay the two-cent shortfall before the end of the applicable grace period. So in “strict compliance” with the law, the Plan Administrator cancels his COBRA coverage leaving him unable to receive care for his illness.

According to COBRA law, qualified beneficiaries must pay their premiums in full and on time. If not, as a general rule, the Administrator has the right to terminate the COBRA coverage; however, COBRA regulations include a stipulation that applies when the shortfall is by an amount that is “not significant.” To be deemed “not significant” the amount of the shortfall must be no greater that the lesser of: a) $50 or b) 10% of the required COBRA premium.

In the event the shortfall is determined to be “not significant,” the Plan Administrator has two options:

  1. Consider the payment as “paid in full.”
  2. Notify the qualified beneficiary of the deficiency and extend to him or her a reasonable time period to make up the shortfall. A safe harbor for this extension, according to regulations, is considered to be 30 days.

In most cases the Plan Administrator will opt to provide a premium shortfall notice and extend a 30-day grace period to the qualified beneficiary. It is rare to see a plan accept the shortfall as payment in full as this would set a bad precedent, not to mention the fact that making a determination as to what constitutes a significant amount or not is a complicated task. Plan Administrators should think through these issues in order to implement a compliant COBRA premium payment system. The following steps may be helpful in handling COBRA premium payments:

  1. Review all COBRA notices, letters and premium payment coupons (if any) making sure they clearly convey all COBRA deadlines and premium amounts. Emphasize that COBRA coverage will be terminated if the payment policy is not strictly adhered to, and once the coverage is terminated, it cannot be reinstated. If partial payments are a recurring issue then Administrators may want to amend their Summary Plan Descriptions (SPD) and plan documents to include similar language. So in the event that a qualified beneficiary’s coverage is terminated for insufficient premiums, the documentation will support the Administrator’s actions.
  2. Sending COBRA notices and letters regarding insufficient payment via certified mail or similar means may be an option in order to get the qualified beneficiary’s attention and to serve as a receipt. Many times the qualified beneficiary argues that they were willing to pay the shortfall but were never notified. This procedure may help eliminate such a claim.

Senate Bill 1217 – Arizona mini-COBRA

To address the lack of options for employees (and/or their covered dependents) that lose their group insurance from their employer with fewer than 20 employees (as calculated in the previous calendar year), Arizona legislation passed Senate Bill 1217 to allow limited-time group continuation coverage. Although similar to the federal law called COBRA, Arizona “mini-COBRA” has numerous differences.

Effective with a small group insurance plan renewal on or after January 1, 2019, employers are responsible for notifying employees/dependents (who have been enrolled on a group plan for a minimum of 3 months and who are not Entitled to Medicare) of their right to continue group coverage for 18 months (“total coverage period”) if they lose coverage due to experiencing any of the following “qualifying” events:

  • Voluntary or Involuntary termination of employment;
  • Reduction of work hours;
  • Divorce or separation;
  • Death of the employee;
  • Employee becomes Entitled to Medicare; or
  • Loss of dependent status under the group plan.

Employers are required to send a notice to the employee/dependent (“qualifier”) within 44 days of the qualifying event. (Unless the employer knows of a dependent’s different address, sending a single letter to the employee will satisfy the notification requirement.) If the notice is postmarked within this 44 day window, the qualifier has 60 days (from the date of the letter) to notify the employer of their desire to continue their group coverage. Qualifiers are responsible for premiums back to the date they are terminated from the group plan and must be made within 45 days from the day they notify the employer of their continuation decision.

If the employer does NOT meet the 44 day notification period, qualifiers will be allowed a 120 day election period and to pay premiums back to the coverage termination date. To ease the burden of creating a notice meeting the law’s requirements, the Department of Insurance has been tasked for providing a “model notice.”

Each qualifier will have an independent right to elect Arizona mini-COBRA. The premiums for the Qualifiers will be based upon the group plan rate plus a 5% administration fee. Employers are also required to notify qualifier of changes to the premiums 30 days prior to the change.

If a dependent is deemed disabled by the Social Security Administration within the first 18 months of continuation coverage, they shall be offered an 11 month extension for a total coverage period of 29 months. If a dependent experience a divorce, separation, employee’s death or Entitlement to Medicare or a loss of dependent status during their time under continuation coverage, they shall be offered an additional 18 months of continuation coverage (for a total coverage period of 36 months).


If a qualifier elects to continue coverage, they may continue until the:

  1.  Qualifier completes their total coverage period;
  2. Qualifier does NOT make “timely” premium payments;
  3. Qualifier becomes Entitled to Medicare, Medicaid or other healthcare coverage; or
  4. Employer terminates (without replacing) the group health insurance plan.

The law also addresses continuation coverage for employees in the Military Reserve or National Guard that is outside the scope of this article. For further information you may want to review https://www.azleg.gov/legtext/53leg/2R/laws/0164.pdf.

SSome of the differences we find between the way the law is written and federal COBRA are:

  1. Regardless of qualifying event experienced, qualifiers will be offered 18 months of coverage;
  2. Employers do not have to offer Arizona mini-COBRA to employees/dependents on Medicare at the time of the qualifying event;
  3. The law mentions a 45 day grace period for submitting the initial premium payment but never defines “timely manner” payments. Without this information, we would assume subsequent premium payments are due on the first of the month of coverage with NO grace period.
  4. Only dependents are eligible for the 11 month disability extension;
  5. Qualifiers may be terminated from Arizona mini-COBRA if it is known they have obtained ANY other coverage;
  6. Employers must notify qualifiers of rate changes 30 days in advance of the change;
  7. Qualifiers may be charged a 5% administration fee; and
  8. The qualifying event “divorce or separated” does not state “divorce or LEGAL separation.”

All contents of this article are our initial opinion of Senate Bill 1217. We request you contact an Arizona Benefits Attorney for advice on this bill. COBRA Solutions will be producing and releasing a separate software product for administering Arizona mini-COBRA after 01/01/2019.

COBRA’s Disability Extension

COBRA offers employee and/or covered dependents an eleven month extension to the current COBRA completion date if certain criteria are met. The extension is provided so qualified beneficiaries may remain on COBRA until they become entitled to Medicare. In theory, affected individuals will meet Medicare’s requirements and be entitled within these eleven months. During the extension, Plan Administrators may charge up to a 50% fee on the applicable premium. The following are the eleven month extension criteria:

  1. The original qualifying event must have been: a. Termination of Employment; or b. Reduction in Work Hours.
  2. Either the employee or covered dependent (spouse or child) must have been considered “disabled” by the Social Security Administration (SSA) on or prior to the 60th day on COBRA.
  3. The Plan Administrator must be notified of the SSA’s disability determination within 60 days after the latest of: a. The date of the SSA determination; b. The date of the COBRA qualifying event; c. The date the employee’s group coverage was lost as a result of the COBRA qualifying event; or d. The date the employee and covered spouse are informed through the carrier’s Summary Plan Description of both the responsibility of providing the “disability” determination and the procedures for providing the notice; and
  4. The SSA “disability” notification must be provided to the Plan Administrator prior to the COBRA completion date.

When the above criteria are met, all individuals enrolled under COBRA shall be eligible for the extension. The DOL and IRS have an interesting interpretation of this aspect of the extension. They have determined that the qualified beneficiary who is deemed disabled does not have to elect to continue under COBRA. So, if you receive a SSA disability determination of the employee or covered dependent that was enrolled on the group plan on the day prior to the qualifying event, it does not matter if they elect to continue under COBRA – all other qualified beneficiaries should be offered the extension. If this is the case, Plan Administrators may only charge the standard 2% (and not 50%) COBRA fee.

We would like to point of the importance of 3d above. If you review the DOL COBRA General Notice, the letter provides detailed instructions as to the notification requirement if a qualified beneficiary is deemed disabled by SSA. If the employee (and covered spouse) never received the General Notice upon enrollment in a group plan, they would have to be offered the eleven month extension even if they notified the Plan Administrator late.

Over the years, we have found the qualified beneficiary’s 60 day notification requirement to be the most often missed element for the disability extension. Some Administrators are adamant about meeting this requirement; others let it slide if all other criteria are met. In theory, an employee may have received his/her General Notice in 1986. Is it reasonable to assume anyone would retain the disability notification requirements after 32 years? Remember COBRA is a minimum requirement. If you wish to offer greater benefits than that required by law, you are welcome to do so. But, you need to make sure the group plan insurer is on board with your policy because they are ultimately responsible for the claims during the disability eleven month extension.

Eligible / Ineligible Plans for COBRA Continuation

 With most organizations, it is easy to determine if a group plan is eligible for COBRA continuation. But some group plans might not be as obvious. First, it is important to understand the definition of a group plan. The IRS defines a group plan as “a plan maintained by an employer or employee organization to provide health care to individuals who have an employment-related connection to the employer or employee organization or to their families.” These individuals consist of employees, former employees and other associated or formerly associated with the employer or employee organization in a business relationship (including members of a union who are not current employees). Health care is provided under a plan whether provided directly or through insurance or reimbursement.

Group health plans must provide medical care (within the meaning of IRS Code, Section 213(d)). Medical care is defined as a diagnosis, cure, mitigation, treatment or prevention of disease and any other undertaking affecting any structure or function of the body. Lastly, the group health plan must be maintained by the employer.

Eligible Plans for COBRA Continuation

The following lists are plans you should be offering COBRA continuation.

  1. Health Insurance Plans, HMOs and Self-funded Health Plans;
  2. Dental Plans;
  3. Vision Plans;
  4. Indemnity type Cancer (or specific disease) Policies – plans that pay a dollar amount per incident and not an amount based upon actual claims;
  5. Prescription Drug Plans;
  6. Health Flexible Spending Arrangements (FSAs);
  7. Health Reimbursement Plans (HRAs);
  8. Executive Medical Reimbursement Self-funded Plans;
  9. Drug or Alcohol Treatment Programs;
  10. Wellness Plans; and
  11. Employee Assistance Plans.

Ineligible Plans for COBRA Continuation

The following is a review of “group” plans that are not eligible for COBRA continuation. (Remember, COBRA is a minimum requirement placed on employers. If they chose to offer continuation coverage on these plans, they can do so provided they have the approval of the insurer/provider.)

  1. 1) Health Savings Account (HSAs) and Archer MSAs;
  2. Long-term Care Plans;
  3. Accidental Death and Dismemberment Plans (AD&D);
  4. Group Term Life Plans (with the exception of Minnesota where state law requires it);
  5. Short – and Long-term Disability Plans (STD & LTD);
  6. Hospital Indemnity Plans (where payments are not directly associated with the cost of services). For example, the plan pays $200 per day the person is in the hospital;
  7. Company Fitness Centers and On-site First Aid Facility; and
  8. Employee Discount Plans.

How do COBRA and Medicare Interact?

COBRA Solutions has been answering questions regarding COBRA since 1991 and we are often asked, “What is the most common question regarding COBRA?” It is actually a very easy question to answer; how Medicare and COBRA interact. This COBRAinReview will discuss COBRA and Medicare and how to administer COBRA correctly.

There are six situations where COBRA and Medicare interact and have been interpreted completely different throughout COBRA’s existence. Keep in mind; you cannot use logic when discussing COBRA and Medicare’s interaction. You also will have a difficult time finding confirming information on the internet. Quite frankly, there are many situations where administrative procedures don’t seem logical. Let’s examine those six COBRA and Medicare interactions.

  1. Employee’s Medicare Entitlement While Continuing to Work

    Not all employees retire at age 65. Many want to continue working but over the years the cost for group coverage has increased to the point many Medicare Entitled employees wish to drop their group coverage and obtain a Medicare Supplement Insurance plan. (And, due to MSP rules, employers may not terminate employee coverage because of Medicare Entitlement.) Although it was once considered a COBRA Qualifying Event for covered dependents, today’s interpretation is that the employee would be voluntarily cancelling his/her group insurance and therefore dependents should not be offered COBRA because coverage is not “involuntarily” lost.

    In a situation where an employee voluntarily removes him/herself from a plan, it is recommend to see if they have dependents on their plan. Prior to contacting the insurer to remove the employee, have a conversation to let them know their dependents will be terminated along with them and will not be offered COBRA. Some employers will have the employee sign a form stating he/she understands this consequence if they still wish to cancel coverage.

    In the COBRA software, you would enter this individual under File > Other Unique Files > Active Employee Voluntary Removal From Group Plan > New File. Enter the employee’s information and the system will place the Voluntary Removal Letter in the Things-to do list. Although not required by COBRA, it is recommended you send this notification so dependents know their coverage has been cancelled.

  2. Medicare as a Multiple Qualifying Event

    Once a COBRA Participant has started on COBRA and then becomes Entitled to Medicare, has a “multiple COBRA Qualifying Event” occurred? We know that Medicare Entitlement is a reason for COBRA termination but what about covered Qualified Beneficiaries? Prior to 2004, it was deemed as a qualifying event and covered dependents were offered up to thirty-six months of continuation coverage. But with Rev. Ruling 2004-22, 2004-10 I.R.B. 553, the Internal Revenue Service determined that a COBRA Participant’s Medicare Entitlement will rarely be considered a multiple qualifying event. They stated that under MSP (Medicare Secondary Payer) rules, group health plans are unable to terminate covered dependent’s coverage; therefore there they should not experience a loss of coverage.

    If a COBRA Participant becomes Entitled to Medicare, you will want to remove them from continuation coverage. Follow the steps below in the software to correctly remove them:

    a) Under the Events menu, select the “Remove Individual from Participant’s Plan > New File.”;

    b) Select the COBRA Participant subscriber file from the dropdown list;

    c) Select the individual that became Entitled to Medicare;

    d) Verify the Participant’s address and enter the last day the individual should be on the plan;

    e) Select the plan(s) that the individual should be removed from; and

    f) Click the Ok button.

    If the system cannot automatically determine, you may then be asked what tier/coverage type the remaining COBRA Participants will have after the removal of the individual. After the removal you will want to verify the billing information. The system will prompt you to send a notification informing the individual of their removal from the plan in the Things-to-do list. Double click on it and send the notification via USPS first class mail. Lastly, if there was a tier/coverage type change, you will want to send new coupons (or a letter detailing the new rates) to the remaining covered individuals.

  3. “Special Medicare Rule”

    Just when you thought you knew everything about how COBRA and Medicare interact, ERISA Section 602(2)(A)(vii) [and Treasury Regulation Section 54.4980B-7 Q?A -4(d)(1) ] changes everything. These sections of the law state the if an active employee is terminated (voluntarily or involuntarily) or experiences a reduction in work hours where there is a loss of coverage within 18 months of the employee’s Entitlement to Medicare;

    a) The employee should be offered the right to continue coverage for 18 months; but
    b) Covered dependents should be offered thirty-six months calculated from the date of the employee’s Entitlement to Medicare.

    The COBRA Administration Manager reviews the age of the employee at the time of the Qualifying Event and notifies the user when the employee is terminated or loses coverage to a reduction in work hours. The system will then create a COBRA Participant file for the employee providing 18 months of coverage and another file for the dependents. The dependent’s COBRA end date will be calculated by adding thirty-six months to the employee’ Medicare Entitlement date. You will notice that the system will change the number of months for COBRA to match the end date that was calculated. This number could be calculated to be between 19 and 36. Do not change it or it will change the correct COBRA end date.

  4. COBRA Participant Becomes Entitled to Medicare

    As we explained earlier, Medicare Entitlement is rarely considered a multiple qualifying event. When either an employee (or dependent of) is effective on COBRA and later becomes Entitled to Medicare, that individual “can” be terminated from continuation coverage. We are using the word “can” be terminated because by law they should be terminated from continuation coverage but we have found many Administrators allow these individuals to continue ancillary plans (i.e. dental, vision, etc.) if the carrier agrees to continue coverage.

    Your COBRA software will notify you when individuals reach age 65 and become Entitled to Medicare. Please follow the instructions found under item #2 to remove them from continuation coverage.

  5. Medicare Entitled Active Employee Experiences Qualifying Event

    Should an active employee age 65+ (who is enrolled under Medicare) be offered COBRA when they are terminated or lose coverage due to reduced work hours? In the previous paragraph we described how individuals should be remove when they are enrolled on COBRA and become eligible for Medicare so it only makes sense that you would not offer a Medicare covered employee COBRA when they experience a qualifying event. WRONG. The law states that the employer-sponsored plan may cover items that Medicare does not. For this reason, employers must offer these individuals COBRA continuation.

  6.  COBRA Participant Receives “Disability Extension”

     Although not directly related to Medicare, the reason for allowing a disabled COBRA Participant an additional eleven months of continuation coverage is to provide time to obtain Medicare. If a Qualified Beneficiary is deemed disabled prior to their sixtieth day on COBRA, notified the Administrator within sixty days of Social Security Administration’s (SSA) Disability Determination and provides that determination prior to the end of their 18 months on COBRA, they should be offered an eleven month Disability Extension. All members of the family unit should be granted the extension as well. If the disabled individual is no longer considered by SSA or becomes Entitled to Medicare, they may be removed from the plan.

Hopefully this description of COBRA and Medicare interaction will aide you in your administration. Please refer to it when you come across one of the above scenarios. If you are still unsure, feel free to call COBRA solutions for assistance.

COBRA Solutions Retirement – On December 31, 2017, Ron Johnson decided to retire from COBRA Solutions. Ron has been great asset for over ten years and will be missed greatly by employees and customers as well. Please join me in wishing him good health, fine wine and a passion for life. Until his position is refilled, you may contact Scott Beaver on extension 12.

COBRA Training 101

As we enter a new year, we receive numerous phone calls regarding COBRA administration procedures. And with the addition of many new users, our staff felt it important to go through the basics of COBRA administration so everyone has a clear understanding as to "what needs to be done when" and your administration responsibilities. We know that this may be elementary for many of our seasoned professionals but we still recommend that you take the time to read through it.

Q: What is COBRA?
A: In July of 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act, commonly known by its acronym COBRA. In the 1980's (as with today), the population of uninsured Americans was growing at an alarming rate. Congress determined that many of these uninsured individuals have some relationship to an employer. Their thought was to create legislation that would allow employees and covered dependents the ability to temporally continue their group coverage for a reasonable amount of time when they experience a "qualifying event."

Q: What is a qualifying event?
A: There are two types of qualifying events; ones that affect employees and others that affect an employee's dependents. The two qualifying events that affect employees are Termination of Employment (for reasons other than "gross misconduct") and a Reduction in Work Hours. To be considered a qualifying event, the employee must have a loss of coverage. (Example: If an employee has a reduction in work hours but is still eligible to continue under the group plans, there is no qualifying event.) Employees experiencing one of these events are eligible to continue coverage (for themselves and their covered dependents) for up to eighteen months under federal COBRA. (Some states such as California have extended the maximum time frame but have placed the burden of administration on the insurance company.)

Dependents have their own qualifying events; Death of the Employee, Divorce or Legal Separation, Employee's Medicare Entitlement and Dependents that no longer meet the definition of a "Dependent" under the group insurance contract. As you can see, covered dependents that experience these qualifying events (in most cases) will experience a loss of coverage and should be offered the right to continue for up to thirty-six months.

Members losing coverage upon experiencing one of these events is classified as a "qualified beneficiary." Each qualified beneficiary has independent rights under COBRA. This means a spouse or dependent child may continue singularly on the group plan as if they were an employee of the company. They may only enroll on the plan(s) they were enrolled on the day prior to the qualifying event (unless they move from a specific service area and another plan is available). At Open Enrollment time, the qualified beneficiary has the same rights as "similarly-situated active employees" and may add/change plans, even add dependents. Dependents added during open enrollment do not receive the same rights as a qualified beneficiary but merely may continue coverage with the qualified beneficiary. In the software, we refer to qualified beneficiaries as "qualifiers."

Q: What are the required notifications?
A: COBRA requires employers (with twenty or more employees - some states have similar state continuation laws with a minimum of two employees) to provide written notifications to inform employees and their covered dependents of their rights to continuation coverage. The law requires five notices; the “General Notice,” Qualifying Event Notice, notice of Conversion rights under eligible group plans, Unavailability of COBRA notice and a Termination letter when the qualified beneficiary terminates coverage prior to the end of his COBRA term. All notifications may be sent by first class mail but some employers prefer to send them in a form that offers proof of mailing. (Administrators are not responsible to see the qualified beneficiary receives the notice but merely prove it has been sent to the last known address.) The General Notice is designed to be sent to newly-hired employees as they enroll on one or more of the group plans. This notification explains COBRA and the steps necessary for notifying the Plan Administrator of a qualifying event. This notice should be sent to both the employee and covered spouse. Many insurance companies include the General Notice in their certificate of coverage but it is recommended a notice be sent via mail. The 2004 Final Regulations state the General Notice should be sent within ninety days from the date coverage becomes effective. We recommend it be sent within 30 days to eliminate other potential issues. To produce this letter in the software, click File and Newly Hired (Active) Employee and enter the employee's information. Double click in the Things-to-Do box on the line that states "Send DOL General Notice to . . ." and the letter will be produced. Since all employees should have been provided this notification at some time; if you cannot prove they receive it you should send another and place a copy in their file.

The COBRA Qualifying Event Letter is the notice sent when an employee/dependent experiences a qualifying event. This letter is similar to the General Notice in that it explains COBRA but it also details the cost for coverage and the enrollment procedures. Anytime you remove someone from the insurance plan, you should examine if a qualifying event has occurred. If so, you need to send a Qualifying Event Letter. To produce the Qualifying Event Letter in the software, click the File Menu followed by the New COBRA Qualifier option. Enter the information on both the employee and covered dependents. (If the employee elected not to cover his/her dependents on any group plans, do not enter them into the system.) Once completed, the Things-to-Do list will state "Send DOL Qualifying Event Letter to . . .” Double click on that line in the list and the letter will be produced, importing the information specific to the qualified beneficiary. This notice must be sent within forty-four days of the later of the qualifying event date or the date coverage is lost. (Employers using a Third Party Administrator must provide notice within thirty days to the TPA and then the TPA has fourteen days to produce and send the letter.)

The Conversion Notification explains an qualified beneficiary's right when they lose coverage at the end of their COBRA term. Not all plans offer a conversion right and the appropriate box should be checked under the insurance plan information screen. If your plan offers a conversion privilege, the system will track a COBRA Participant's coverage and 180 days prior to the end of their COBRA time frame, a line in the Things-to-do box will advise you to send this notification. A conversion policy is an individual plan whereby the employee/dependent does not have to qualify (by medical underwriting) for coverage. Usually, conversion policies are age-rated and have higher rates than standard individual plans.

The Unavailability of COBRA notification is sent to former qualified beneficiaries who are not eligible to continue under COBRA. For example, a spouse contacts the Plan Administrator ninety days after his/her divorce of their desire to continue coverage. The law provides sixty days for the qualified beneficiary to notify the Plan Administrator; therefore the person did not meet the deadline and have become ineligible for continuation coverage. In the past, the individual would be under the assumption they had coverage (until they submitted a claim and it was denied). For this reason the Department of Labor (DOL) requires Plan Administrators to send a notification explaining they were not re-activated and they do not have coverage. To create this notification, select FILE/Other Unique Files/Individual Ineligible for COBRA/New File. Enter the individual’s information and save. The Things-to-do box will notify you to send the Unavailability of COBRA notice.

In the event you are removing a qualified beneficiary from the group plan (voluntarily or not) prior to the end of their COBRA time frame, the 2004 Final Regulations require you send a termination notice. The software has always produced these notifications and you will be prompted in the Things-to-do box after terminating their coverage. Produce the letter and send as soon as possible (because time frames will vary based upon the type of termination experienced).

COBRA Acceptance - The natural progression of events is that Active employees and covered dependents become qualified beneficiaries who then become COBRA Participants (when they agree to pay for premiums for continuation coverage). As part of the COBRA Qualifying Event Letter, a Summary and Election Form is provided so the qualifier may notify you of their desire to continue coverage. If you receive this form or are contacted directly, you should have them complete a COBRA application for the insurance carrier(s) and notify the software so it may set-up a billing account. Qualifiers have sixty days from the later of date they lose coverage or the date on the Qualifying Event Letter to notify you of their desire to accept COBRA.

Since COBRA coverage is continuation coverage, you must add them back onto the group plan with no lapse in coverage. This could mean going back a few months to retro-actively add them back onto the plan(s). There is one exception when you would not retro-actively enroll the qualifier and that is when the employee removes a dependent from the plan "in anticipation of a future qualifying event." The most common situation is when an employee removes a spouse and later they are divorced. In that situation, you would offer COBRA to the spouse effective on the date of the divorce.

The most important procedure with COBRA administration is to document or have a paper trail of all COBRA-related events. A 2006 court case demonstrated the importance of maintaining a copy of sent notifications (which the software stores in its digital file cabinet) as well as a log detailing all notifications sent, when they were placed in the mail and have the administrator initial it was mailed. The software has a Proof of Mailing Form that should be completed on a daily basis and maintained in a log book.

Q: What about COBRA Premiums?
A: Once a qualifier elects COBRA and becomes a participant, they are required to make payments to your organization. Premiums are based upon the group rates your firm is charged. As an administration fee, you may add two percent to help cover costs. The participant is required to make payments in a timely fashion. They have a forty-five day grace period to make their initial premium payment. Thereafter, they have a thirty-day grace period. If they do not pay within these time frames, you may terminate their coverage. The software tracks payments and notifies you when someone has not paid in a timely fashion. Once notified, you should prepare the termination notice and then terminate them from the plan effective the last day premiums were paid through. If no payments were ever made, terminate coverage back to the original date they were terminated from the group plan. You will want to make sure you notify the insurance companies as soon as possible because most of them have implemented a maximum retro-termination policy, only allowing you to receive premium credits back sixty days. If an employee notifies you they wish to continue coverage but do not submit a premium payment, send the carrier the COBRA enrollment form with a note stating you have not received payment. With this information, the carrier will show the individual enrolled under COBRA but will not pay claims until premium is received.

There will be times when participants will not pay you prior to the company submitting group premiums to the insurance carriers. If you have not received COBRA payments, it is recommended you do not pay the carrier for their premiums.

Q: What is a disability extension?
A: If a qualified beneficiary is disabled on a date that is earlier than the 61st day under COBRA and later considered “disabled” by Social Security, the law provides for that individual and all others covered under the same policy to extend their coverage from eighteen to twenty-nine months. This eleven month extension comes with a price. Employers may (or may not) charge a fifty percent administration fee during this extension. The software will make the necessary change to premiums, automatically.

Q: What is a Multiple Qualifying Event?
A: If an employee initially experiences a termination of employment or reduction in work hours and later a covered dependent experiences another qualifying event, the dependent should be offered the right to continue up to thirty-six months from the original COBRA start date. In the software, click the Events Menu followed by the Multiple Qualifying Event option. Enter the information on the qualifier and the system will create a new billing account for them and produce a letter explaining their rights. (If employment termination follows a reduction in work hours, the law does not consider it a multiple qualifying event, therefore the qualified beneficiary would only receive the eighteen months continuation coverage offered upon the reduction of work hours.)

This is a very brief summary of COBRA. The actual law is hundreds of pages and is very complex. We appreciate your confidence in our software and hope that we can continue to provide you with useful information to assist with maintaining your COBRA compliance. Our goal is to keep you informed about COBRA, proposed legislation and the operation of our software. If you have any recommendations as to content of these monthly newsletters or software enhancements, feel free to email us at help@csisupport.com.

Rules for Open Enrollment

When open enrollment season rolls around, keep in mind that COBRA qualified beneficiaries have the same rights as active employees. Open enrollment is a period in which an employee covered under a plan can choose to be covered under another benefit package within the same plan and at the same time can add or remove coverage of family members. This same rule also applies to COBRA. Under COBRA, a qualified beneficiary is only entitled to continue the coverage in place immediately before the qualifying event. However, COBRA regulations provide that a qualified beneficiary may change coverage at open enrollment to the same extent that similarly situated active employees can do under the plan.

A good example would be taking an employer who offers both a medical indemnity option and an HMO option. Jim an employee who is covered under the medical indemnity option terminates his employment and elects COBRA in July to continue his medical indemnity option coverage. In December during the open enrollment period, Jim now must be given the opportunity to switch to HMO coverage for which the premium rates could be different. If Jim had a spouse who also elected COBRA, the spouse would have the same independent right to switch to the HMO coverage as well. If the spouse retained her indemnity coverage and Jim switched to the HMO, the plan could charge each of them the individual premium rate applicable to the coverage elected.

The rules allow for a qualified beneficiary who elected and paid for COBRA to add coverage for dependents under that plan at open enrollment. If the plan permits active employees to add new family members at times other than open enrollment, then qualified beneficiaries must be permitted as well.

Example of adding a dependent to COBRA coverage: Bob is a covered employee under the group health plan maintained by his employer. At the time when Bob’s employment is terminated, none of his family members are covered under Bob’s group health plan. Because the family members were not covered under the plan the day before the qualifying event, the family members are not qualified beneficiaries and do not have a right to elect COBRA. However, if Bob elects and pays for his COBRA coverage, he must be allowed to add his family members to his COBRA coverage under the plan during any open enrollment period to the extent as similarly situated active employees can do so. The premiums may change based on different rates for family plans.

Here is an example of a dependent child-qualified beneficiary adding a dependent: John is a covered employee under his employer’s group health plan. John’s spouse and child are also covered under the plan. When John terminates employment, all three family members elect and pays for COBRA coverage. John’s child, Jerry, has his own child while still receiving COBRA coverage. In this case, because the child is not a child of John, the child is not a qualified beneficiary in its own right, however Jerry must be allowed to add the child to his COBRA coverage under the plan during open enrollment.

During an open enrollment, qualified beneficiaries can not only switch from one medical plan to another, they can also elect plans of different types if similarly situated active employees are allowed to do so. For example, if an employer offers medical and dental coverage under two separate health plans and a qualified beneficiary elected medical only for his COBRA coverage, the qualified beneficiary must be given the opportunity to add dental to his coverage during the plans open enrollment.

Remember that each qualified beneficiary has their own independent rights. Example: Rick is employed by a company that offers several group health plans. By the terms of the plans, any family member whom an employee chooses to cover must be covered by the plan covering the employee. Before Rick’s termination of employment, he along with his spouse and two children are covered under Plan A. Upon Rick’s termination, each of the four family members is a qualified beneficiary. COBRA coverage is elected by all four family members. Six months after Rick’s termination, there is an open enrollment in which active employees are offered an opportunity to choose to be covered under a new plan or to add or eliminate family coverage. During the open enrollment period, each of the four qualified beneficiaries must be offered the opportunity to switch to another plan as though each qualified beneficiary were an individual employee. Each member of Rick’s family could choose coverage under a separate plan even though family members of employed individuals could not choose to do so. Of course the individual premium would apply under each plan.

No Cost Coverage Eliminates Need for COBRA Penalties

The failure to provide a COBRA notice can result in damage claims and statutory penalties. However, these claims and penalties can be avoided by good faith actions of the plan administrator. In this case a qualified beneficiary sued the employer for failing to provide a COBRA election notice after receiving benefits for 11 months of free coverage based upon an administrative error by the employer. For that reason, a federal district court in Iowa rejected claims that the employer should be subject to COBRA penalties for its notice failure. The case is Cole v. Trinity Health Corp. 2014 WL 222724 (N.D. Iowa, Jan 21 2014).

Bonnie Cole, an employee of Trinity Health Corp., was covered along with her husband and son by Blue Cross Blue shield of Michigan under the company’s group health plan. In December 2010 Bonnie went on leave under the Family and Medical Leave Act. On March 2, 2011 her FMLA expired, and she went on short-term disability leave, which expired on June 8, 2011. Cole temporarily received long-term disability; the LTD insurer ultimately denied benefits but did not request repayment of what it already paid.

Cole’s employment termination date should have been June 8, 2011, the last date on which she was qualified for disability benefits and considered an employee. However, her termination was not processed at that time and she remained on the health plan. In late April 2012, Trinity Health discovered that Cole had not been terminated, so that was processed on May 8, 2012, effective June 8, 2011, and Blue Cross was notified. The Coles’ coverage was terminated effective Jan. 1, 2012. At this time, they had received covered benefits through April 2012.

The Trinity Health system indicated a “COBRA Term Sent Date” of May 8, 2012, but a COBRA notice had not been sent.

After a doctor informed Cole’s husband that they no longer had health coverage, Cole got confirmation from Blue Cross that their coverage had ended. However, it still covered all claims through April 30, 2012. The Coles had $1,307 in medical claims denied by Blue Cross beginning on May 1, 2012. The Coles did have access to coverage through her husband’s employer which became effective June 1, 2012.

The Coles sued Trinity Health, stating that the company violated COBRA’s notice requirements. They sought statutory penalties of up to $110 per day. Trinity Health conceded that it did not send a COBRA notice but argued that a penalty was unwarranted because the Coles received about 11 months of free health coverage. This far exceeded the $1,307 in medical claims incurred before they were covered under her husband’s plan. The court agreed, noting that because of the Coles’ benefit of receiving extended free health coverage, they were already in a better position than they would have been in but for the COBRA notice violation.

In this author’s opinion: Mistakes are bound to happen when administrating COBRA. However when a mistake does happen plan administrators need to be sure to take a good faith and reasonable approach in solving the issue to avoid any risk of penalties and damages

Record Keeping Makes the Difference

As part of a recent discrimination lawsuit, an employer was able to prevail when charged with COBRA Notification Failure due to explicit record keeping. In the suit Perkins v. Rock-Tenn Servs., Inc, 2017 WL2829100 (6th Cir. 2017) the employee claimed she did not receive a COBRA election notice following her resignation. Even after the employee challenged the fact the court was simply depending upon an affidavit from the Third Party Administrator’s delivery manager, the trial court still found the employer had sufficiently provided proof that its TPA had mailed the notice.

In this case the TPA was contracted by the employer to provide recordkeeping services as well as sending COBRA notices to all terminated employees. The delivery manager for the TPA explained that even though they did not retain hard copies of COBRA notices they did keep computer records. While the manager himself did not send the election notice to Ms. Perkins, he was able to show screen shots from their computer system, corroborating the fact the notice had been sent. This evidence, along with the fact that the manager was a long time TPA employee well versed in proper recordkeeping, caused the appellate court to determine the proper notification had occurred.

In this author’s opinion, this case is a reminder that when COBRA notification lawsuits occur, courts often look to the employer or Third Party Administrator’s ability to provide written COBRA notice procedures and records that show these procedures are consistently followed. Remember, proof of receipt is not required. The crucial element in these cases is simply to prove that the notice was sent by means reasonably calculated to reach the qualified beneficiary. It is critical to retain records that back up the fact the procedure is being followed like clockwork.

Extraordinary Circumstances During Election Period

What happens when a qualified beneficiary is incapacitated during the COBRA election period? A recent court case sheds light on this predicament. The case is Regents of the Univ. of Ca. v. Stidham Trucking, Inc., 2017 WL 3840259 and the following are the facts:

Jack Franklin, an employee of Stidham Trucking, Inc. voluntarily resigned on Sept, 26, 2014. The company then properly sent him a COBRA notice giving him 60 days to elect COBRA benefits. Toward the end of the 60 day period, Franklin was in an accident and was hospitalized at University of California Davis Medical Center for 10 days. According to the lawsuit, Franklin was incapacitated during his hospital stay and never elected COBRA.

Upon admission, Regents of the University of California (Regents UC) on behalf of the medical center, alleged that Franklin signed over all of his insurance rights and that his 10-day incapacitation was reason for equitable tolling of the 60-day COBRA election period. In their lawsuit, Regents UC argued that Franklin should have received a new 60 day notice at that point from the plan administrator.

Strangely enough, it wasn’t until 2 years later that Regents UC decided to sue in order to seek a brand new election period. They filed a suit against Stidham, The insurance broker (CobraHelp) and the insurer (Anthem) for COBRA violations, alleging that the defendants denied Franklin the statutory benefits of COBRA by failing to adequately provide him with an opportunity to elect COBRA coverage under the equitable tolling principle.

In the end, the court decided the claim was based on a “misconstruction” of the equitable tolling principle, therefore dismissed the ERISA claims against all parties. The court explained that equitable tolling means the “clock stops running when the extraordinary circumstances arise, but the clock resumes running once the circumstances have ended or when the petitioner ceases to exercise reasonable diligence, whichever occurs earlier.” (Luna v. Kernan, 784 F. 3d. 640, 651 (9th Cir. 2015).

So in this case, Franklin’s election period would have been 70 days at the most. It would not have created another 60 day period, and most certainly would not have extended it another 2 years as requested in this lawsuit! Remember, equitable tolling simply pauses the election period during extraordinary circumstances. If a QB becomes incapacitated or dies during the COBRA election period, the courts have allowed time for recovery or for a legally appointed guardian to either represent the qualified beneficiary or to represent his/her estate.

Class Action Suit for COBRA Notice Violations

In a recent class action suit Pranav Bhattancharya and Navanneetha Koothapillai sued Capgemini North America, Inc. and Capgemini Financial Services, USA, Inc., on behalf of themselves and others for alleged violations of the COBRA provisions in the Employee Retirement Income Security Act (ERISA). The case is Bhattancharya vs. Capgemini North America, Inc. 2016 WL 7049082 (N.D. Ill. December 4, 2016). They claimed that the defendants, as plan administrators, failed to provide them initial COBRA notices as well as COBRA election notices.

As part of their lawsuit, they were seeking injunctive relief, the reimbursement of medical expenses and the cost of insurance premiums paid while they should have been covered. They also asked for statutory penalties of $110 per day for failure to prove a summary plan description (SPD) and a COBRA notice, along with attorneys’ fees and costs.

The penalty claim was promptly dismissed; the court sided with the defendants noting that statutory penalties are not assessed for failing to provide an SPD, but rather when a plan administrator fails or refuses to comply with an information request. The court, however, did not accept the defendants request to dismiss all claims due to their argument that the plaintiffs failed to properly name the plan administrator. The defendants tried to offer a copy of an SPD that listed the Plan administrator as Peter Kornoswke but because “Capgemini Financial Services” followed his name the court rejected their request. The court determined that this could imply the plan administrator was either Kornowske alone or both Kornowske and Capgemini. The court suggested the plaintiffs amend their claim by adding Kornowske as a defendant to remove any confusion.

Furthermore, the defendant’s argument that procedural ERISA violations should only entitle a plaintiff to monetary compensation in the case of bad faith, concealment or prejudice was rejected by the court. They concluded these components are used in determining whether to impose penalties – not as requirements for initially asserting a claim. Again, the court suggested the plaintiffs amend their complaint to allege bad faith, concealment and/ or prejudice. Lastly the defendant’s request to dismiss the injective relief claim was also shot down by the court citing procedural reasons.

In this author’s opinion, this case serves as a reminder for employers and plan administrators to carefully review their COBRA notice procedures as well as content requirements to make sure they are compliant. Using the model COBRA election forms as set forth by the U.S. Department of Labor (DOL) is a smart move so as not to find yourself in hot water with a lawsuit that could result in a settlement or award of damages.

Dangers of Verbal Elections

In order to avoid the game of “who said what” the election notice should require the qualified beneficiary to complete and return the election form provided. This offers proof of their intent as well as documentation for whom they are electing. The following cases are examples of how risky it can be to use verbal elections:

Lackman v. Recovery Service of New Jersey Inc.

During the exit interview the qualified beneficiary, Lackman misunderstood the conversation regarding the coverage being offered when his employer stated it would extend coverage one month as a courtesy. Lackman then believed he would have extended coverage for two months.

When taken to court it was determined that the verbal conversation between Lackman and his employer was irrelevant as Lackman did indeed receive a COBRA election notice a few days after his termination. That notice informed him that he had 60 days from his termination date to make his election. The court ruled that this was a misstatement of the law as the election period is actually 60 days from the latter of the loss of coverage date, or the date that the notice is sent. In this case, that extra month of coverage that the employer offered him should have also extended his election period. Additionally, the notice did not include one very important element – the loss of coverage date.

Lloyd v. Harrington Benefit Services, Inc.

In this case, the qualified beneficiary, Lloyd, alleged he had been given a verbal agreement by his new employer to process and pay for his COBRA coverage from his former employer until he could obtain coverage under the new employer’s health care plan. Both Lloyd and the employer failed to send the COBRA election or payment to the former employer; however it was soon discovered that his coverage had mistakenly continued anyway when Lloyd ended up being rehired by the former employer. The plan was able to obtain reimbursement from the health care providers that had received the mistaken payments for $15,000 in medical claims incurred by Lloyds’ wife during his employment with the new employer. The health care provider’s then came after Lloyd, whereby Lloyd then sued the plan administrator for failing to follow through with the verbal agreement to take care of the election as promised.

The court ultimately dismissed the case because it was determined that he had received his COBRA election notice from his former employer and furthermore the plan administrator did not have any responsibility for the employee’s failure to elect and pay for COBRA coverage. The court determined that Lloyd was not entitled to COBRA coverage and rejected his argument that the other employer was obligated to pay for the claims because no election or payment was ever received.

In this author’s opinion, when an employer receives a verbal election, it would be prudent to make the acceptance of the verbal election conditioned upon receiving a written acceptance so that there are no misunderstandings and lack of documentation. In case the election period is nearby, request that the qualified beneficiary send an email or fax to be safe.

When Administrating COBRA it is Best to Stick to the Guidelines

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:

A Participant must have been disabled (prior to or) within 60 days of the COBRA start date. 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. 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.

Penalties for Late Notice If No Proof of Harm to Qualified Beneficiary?

Will the courts penalize a plan administrator for providing a late COBRA notice if it cannot be shown that the qualified beneficiary was harmed or prejudiced by the late notice? According to a recent court case the answer is “no” as long as there is no intentional bad faith involved. In the case Pethers v. Metro Lift Propane, 2010 WL 3023887 (E.D. Mich., July 29, 2010) Robert Pethers was terminated by Heritage Operating L.P. d/b/a Metro Lift Propane on Oct. 24, 2008. He sued the company for COBRA notice violations when he did not receive a COBRA notice until Dec, 27 2008 - 64 days after his termination date which is well beyond the required 44 days. Pethers did acknowledge however that the notice was dated much earlier in the month and Heritage had paid his health coverage through the end of December 2008.

Even though Pethers admitted that there was no harm done by the late notice as neither he nor his family members were denied medical care or coverage, he moved ahead with his a suit against Heritage for notice violations. The court actually noted that in this case it could be argued that Pethers did not even have a COBRA claim at all because of the fact that the notice was indeed dated earlier, “suggesting that Heritage timely complied with the statute by sending the packet within the 44-day period allowed.” The court further noted that even if Heritage had violated COBRA law on a technicality, it would not be appropriate to assess a penalty. After taking into consideration other similar court cases where a plaintiff could not prove any harm or prejudice resulting from the notice failure, and of course the failure was not intentional, the court concurred by ruling against Pethers. It was determined that not only was Pethers entitled to no damages whatsoever for the late COBRA notice, but his claim was dismissed as well.

In the author’s opinion: Generally speaking, when a qualified beneficiary does not suffer any harm or prejudice due to a notice failure and the employer did not act in bad faith, past history shows the court will generally rule out any damages.

Content Matters When it Comes to Election Notices

An employer/plan administrator is now dealing with a class action lawsuit involving three COBRA claims due to vague language in its COBRA election notice. First, the lawsuit alleges the election notice was not clear enough about the specific date that the COBRA coverage would end. Secondly, it claims there was no instruction as to where to send the premium payments. Finally, it alleges the verbiage in the notice was crafted in such a way that would not be understood by the average plan participant. The case is Valdivieso v. Cushman and Wakefiled, Inc. 2017 U.S. Dist . LEXIS 75574 (M.D. Fla. May 18, 2017).

The facts of the case are as follows:

After Cushman & Wakefield terminated Luis Valdivieso, a COBRA election notice was sent to him. Keep in mind Valdivieso’s native language is Spanish; however, he can read English as well. Valdieso argued that Cushman & Wakefield were not accommodating to the fact that he and his wife were 68 and 61 years old respectively and English was their second language. By sending the notice in English and by using one of the smallest font sizes possible, Valdieviso alleged that Cushman and Wakefield thereby violated the regulatory requirement that a COBRA notice be written in a manner sufficient to be understood by the average plan participant. The court, however, determined that a 68 year old who had trouble reading English would not be considered an “average” participant. Therefore, the court promptly rejected Valdivieso’s 3rd claim. As for the other two, the court noted these were plausible claims.

In regards to the first claim that the notice did not have a specific date of termination, the court agreed. Cushman and Wakefield tried to argue that they had made a good faith effort to comply with its COBRA notice requirements by allowing Valdieso to make an informed decision whether to elect COBRA. They cited a previous court case from 2002, but the court rejected their argument because the good faith defense predated the U.S. Department of Labor’s 2004 COBRA notice regulations. The DOL’s regulation has now included the phrase “termination date” which suggests the employers must state the specific day that the coverage will be terminated.

As for the failure to mention an address to send the premiums, the court again held that Valdivieso stated a plausible claim. Cushman and Wakefield argued that their notice stated, “Additional information about payment will be provided to you after you make your election.” But the court noted that the DOL’s model notice includes a place to enter an appropriate payment address.

In this author’s opinion this case illustrates the importance of not only making sure COBRA election notices are sent to qualified Beneficiaries on a timely basis, but also be diligent about ensuring the content of the notice fulfills the COBRA regulations requirements. The safest bet is to think about using the model COBRA election notice published by the DOL.

COBRA Regulations for Dependent Children

COBRA regulations for dependent children can be confusing and we field many calls from administrators about what must be offered to dependent children, newborns, and adopted children in regards to COBRA coverage. Hopefully the following will provide a better understanding on how to administrate COBRA for children as beneficiaries.

It is important to remember that the term “dependent child” is not defined by COBRA, but rather by the terms of the group health plan. Therefore the Cobra term “dependent Child” is not to be confused with the terms “dependent” or “tax dependent” which are used for federal tax purposes. For example, it is possible that an individual living in the household might be a tax dependent and yet not a Cobra qualified beneficiary because he or she is not a dependent child of the covered employee. Furthermore, dependent children who are qualified beneficiaries have COBRA rights separate from and independent of the covered employees and spouses who are their parents.

There is one circumstance that allows a child to be a qualified beneficiary regardless of whether that he or she is a dependent of the covered employee. For example, a child is receiving benefits according to a qualified medical child support order (QMCSO). A QMCSO creates the right of a child of a plan participant to receive benefits under the participant’s group health plan. It may be required that the health plan of a noncustodial parent provide coverage for that child even though he or she is not considered to be a “dependent” per the health plan’s definition. When a child is enrolled in a group health plan under a QMCSO he or she is treated as a beneficiary for all purposes of ERISA regardless of his or her status as a dependent of the covered employee.

In terms of adult children, if the group health plan provides coverage for the children of their participants, then the coverage generally must be available until the child turns age 26 regardless of their student status. Furthermore, a child enrolling under this mandate must be treated as a HIPAA special enrollee and be offered all of the benefits available to similar individuals who did not lose coverage due to loss of dependent status.

Newborn and newly adopted children that are born to or placed for adoption with the covered employee during COBRA continuation coverage are also considered to be a qualified beneficiary. However, there is a limitation added per the IRS COBRA regulation: If a covered employee who is a qualified beneficiary has not elected COBRA coverage then any newborn or adopted child of the employee born or adopted after the qualifying event is not a qualified beneficiary. It must be pointed out, however that the meaning of this statue is somewhat unclear and may be difficult to interpret in various scenarios. One thing is clear – the newborn or newly adopted baby must be born to or adopted by the covered employee in order to be a qualified beneficiary. For example, if a dependent child Mary ceases to be a dependent and elects COBRA, then gives birth to a baby, that baby would not be considered a qualified beneficiary.

As for a newborn or newly adopted child added at Open Enrollment, the qualifying event giving rise to the period of coverage during which the child is born or adopted determines the amount of remaining coverage. However, if there is a second qualifying event, such as the death of the covered employee, then the child’s COBRA coverage will be extended 36 months from the employee’s termination date. A newborn child has the parent’s maximum coverage period and a child is entitled to the same coverage as children of active employees. For example, if the active employee is allowed to change coverage or add dependents at subsequent open enrollments, then the newborn or adopted child must be allowed to do so as well. Additionally, there are stipulations in the case of an adopted qualified beneficiary with a dependent. For example, if 18 year old Julie is adopted by an active employee during his COBRA coverage, but her daughter Natalie is not adopted, then only Julie can elect coverage at that time. However, at the next open enrollment Natalie can become covered, although Natalie will not be considered a qualified beneficiary.

It must be noted that COBRA’S election rules (including the 60-day deadline) do not apply to the children born or adopted during the COBRA continuation period. They must be enrolled during either the plans’ special 30-day enrollment period or some other period such as open enrollment. In summary although a newborn or newly adopted child is automatically considered a qualified beneficiary, the child is not covered until enrollment occurs. Because the IRS COBRA regulations do not provide for a specific period in which a newborn or newly adopted qualified beneficiary must enroll for COBRA coverage, special caution and legal counsel should be taken before rejecting late enrollments. Furthermore, because the plan administrator is not required to provide a separate COBRA election notice for the newborn or adopted child, the rights of these children should be clearly explained in the election notice that is provided to the qualified beneficiary. The IRS regulation’s definition of adoption or placement for adoption means, “The assumption and retention by the covered employee of a legal obligation for total or partial support of a child in the anticipation of the adoption of the child.” ERISA offers more guidance on what “placed for adoption” means however plan administrators should note that a child may be placed for adoption prior to the adoptive parents having physical custody of the child. Typically when COBRA is elected coverage begins on the date of the qualifying event. Because this rule cannot be applied to a newborn or adopted child who becomes a qualified beneficiary during a COBRA continuation period caused by another qualifying event, the plan administrator will need to determine when the child’s coverage is effective.

Court Rejects COBRA Penalties Even Though Administrative Error Occured

Due to an administrative error, an employer clearly did not provide a qualified beneficiary with a COBRA election notice. However, the qualified beneficiary also benefited from that mistake by receiving 11 months of free health coverage. For that reason, a federal district court in Iowa rejected claims that the employer should be subject to COBRA penalties for its notice failure.

Facts of the Case:

Bonnie Cole, an employee of Trinity Health Corp., was covered under the company’s group health plan, along with her husband and son. Blue Cross Blue Shield of Michigan was the insurer.

Bonnie went on leave under the Family and Medical Leave Act beginning in December 2010. Her FMLA leave expired on March 2, 2011, and she went on short-term disability leave, which expired on June 8, 2011. Cole temporarily received long-term disability; the LTD insurer ultimately denied benefits but did not request repayment of what it already paid.

Cole’s employment termination date should have been June 8, 2011, the last date on which she was qualified for disability benefits and considered an employee. However, her termination was not processed at that time and she remained on the health plan. In late April 2012, Trinity Health discovered that Cole had not been terminated, so that was processed on May 8, 2012, effective June 8, 2011, and Blue Cross was notified. The Coles’ coverage was terminated effective Jan. 1, 2012. At this time, they had received covered benefits through April 2012.

The Trinity Health system indicated a “COBRA Term Sent Date” of May 8, 2012, but a COBRA notice had not been sent.

After a doctor told Cole’s husband that they no longer had health coverage, Cole got confirmation from Blue Cross that their coverage had ended. However, it still covered all claims through April 30, 2012. The Coles had $1,307 in medical claims denied by Blue Cross beginning on May 1, 2012. The Coles did have access to coverage through her husband’s employer, however, which became effective June 1, 2012.

The Coles sued Trinity Health, alleging among other things that the company violated COBRA’s notice requirements. They sought statutory penalties of up to $110 per day. Trinity Health conceded that it did not send a COBRA notice but argued that a penalty was unwarranted because the Coles received about 11 months of free health coverage. This far exceeded the $1,307 in medical claims incurred before they were covered under her husband’s plan. The court agreed, noting that because of the Coles’ benefit of receiving extended free health coverage, they were already in a better position than they would have been in but for the COBRA notice violation.

Insufficient COBRA Premium Payments

According to COBRA regulations, a qualified beneficiary is required to pay their COBRA premiums on time and in full. The plan administrator has the right to terminate COBRA coverage if the qualified beneficiary fails to make the proper payment; however, COBRA law includes a special rule in the case of underpayments. If the shortfall is deemed to be “not significant” (which means it does not exceed $50 or 10% of the COBRA premium) then the plan administrator can do one of following:

First, the plan administrator can simply accept the deficient payment as “paid in full.” Or secondly, the plan administrator may choose to notify the qualified beneficiary of the shortfall and allow for a reasonable timeframe for the deficiency to be collected. Simply accepting the insufficient payment as a full payment can be a slippery slope for most plan administrators – it is difficult to determine what is “not significant” and it also sets a precedence for future payments. So in the majority of cases the plan administrator will opt for the second choice and notify the qualified beneficiary of the shortfall.

This is where things can get tricky – there is a separate COBRA stipulation for grace periods. For the initial payment the grace period is 45 days from the date of COBRA election. After that the grace period is generally 30 days for successive payments. But keep in mind even though 30 days is considered the safe harbor for a grace period, it can actually be longer if the plan is insured and the insurer allows more than 30 days for the employer to make the payment for plan coverage. If that is the case, then the same timeframe must be offered to the qualified beneficiary as well.

When an insufficient payment is made, often times the reason is simply due to a mix-up or error. Perhaps the wrong check to another institution was mailed inadvertently in the COBRA envelope or the numbers written on the check were simply transposed. Although a plan administrator is within the legal rights to begin the termination procedures, in this author’s opinion it might be prudent to go above and beyond to ensure an extra effort was made to allow the qualified beneficiary to rectify the error. Especially if it is apparent that the qualified beneficiary has a history of making the proper payments and suddenly there is an insufficient payment, it might make sense to call or email them to make sure the consequences are clear. Doing so will mitigate costly lawsuits and benefits claims, not to mention the fact that as a plan fiduciary, ERISA requires one to always act in the best interest of participants and beneficiaries.

COBRA Notice Sent on Time Includes Insufficient Content

According to COBRA law, termination of employment or a reduction in hours that thereby results in a loss of health care coverage, are both considered a “qualifying event.” Qualifying events then entitle a qualified beneficiary to “up to 18 months of coverage.” Keep in mind that just because a COBRA notice has been sent to a qualified beneficiary in good faith on a timely basis does meet mean that the employer or plan administrator has met all legal obligations. According to the Department of Labor’s Model Notice there are fifteen content requirements that need to be included in the election notice. A recent court case illustrates the importance of ensuring to cover all 15 specific items in your COBRA notices to avoid costly litigation and penalties. This pending case is Griffin v. Neptune Technology Group, 2015 WL 1635939 9m.D. Ala., April 13, 2015).

Upon termination of employment from Neptune Technologies, Joshua Griffin decided to sue his former employer for failure to send a COBRA notice. Neptune came to court prepared to show they had in good faith sent an election notice to Griffin’s last known address via first class mail. Their Benefits Coordinator attested she followed the routine process in Griffin’s cases, even submitting to the court a copy of the COBRA notice and metered envelope she had sent to Griffin on Jan 32, 2013. Additionally, Neptune provided documentation of their usual method of preparing and sending COBRA notices, including a declaration from another employee describing their standard mailing procedures.

The case is ongoing and thus far the Federal District Court in Alabama did not dispute that Neptune acted reasonably in sending the election notice to Griffin. Neptune was able to show that the notice was properly mailed - first class mail to the last known address. Neptune showed the court that they followed the proper legal requirements in how they sent the notice to Griffin. However, to Neptune’s surprise, the court denied their summary judgment motion stating that the content of the notice was insufficient - only five of the required items were included in their COBRA election notice to Griffin. At that time the DOL’s Model Notice only included fourteen specific requirements but has since been expanded to fifteen. The court noted that not only was this notice woefully incomplete, they pointed out that it directed Griffin to return the election form within 60 days of the notice and to “follow instructions on the next page to complete the enclosed election form.” However, in looking closely at their instructions, the court realized there was no such page attached! It was therefore determined that Neptune failed to provide sufficient content in its notice for Griffin to make a reasonably informed decision as to whether to elect COBRA coverage or not.

In this author’s opinion, let this case be a reminder to read the DOL’s model election notice that was last updated in May 2014 to ensure your election notices comply with all fifteen requirements – after all, content does matter! And don’t forget, the notice should be written in a manner that can be understood and completed properly by the average participant. Failure on the part of a plan administrator to meet COBRA’s requirements can be subject to statutory penalties of up to $110 per day.

Notices Require Specific Information

An employer who attempted to send verbiage from an employee handbook as a COBRA notice “failed miserably” to comply with COBRA law, according to a recent court ruling. It was determined that even if a notice is sent on a timely basis, if the notice does not include specific information per COBRA mandates, it can result in COBRA penalties as well as vulnerability in terms of claims liability. The case is De Leon-Serrano, et al. v. Northwestern Selecta, Inc., 2015 WL 1470571 (D. Puerto Rico, March 31, 2015).

Facts of the case: As a newly hired employee of Northwestern Selecta, Inc., Edgard De Leon-Serrano elected family coverage under their group health plan. Northwestern acted as both the plan sponsor as well as the plan administrator for this plan. De Leon-Serrano was provided with an employee handbook upon his employment which included a three sentence paragraph on COBRA.

COBRA Plan
“This benefit allows an employee who has terminated his/her services with the company to maintain the medical insurance he/she had with the same (if it’s the case), so long as he/she makes the total payments for the cost of the COBRA plan for a maximum period of 18 months, starting on the date of his/her termination or until the employee acquires another medical insurance, whichever is less. One of the principal benefits of the COBRA plan is to provide extension, during the time the employee makes the corresponding payments, to the price of a group plan and not to the price of a self-insured medical insurance. Those insured in the COBRA plan under treatment recognized by the COB RA law and who meet the 18 month coverage may qualify for a coverage extension.”

When De Leon-Serrano terminated his employment on Feb, 15, 2013, Northwestern allegedly sent him and his family a COBRA election notice approximately one week later. The De Leon-Serranos claimed both this notice, as well as the general notice of COBRA rights in the beginning of his employment, were neither timely nor sufficient.

Northwestern tried to claim that the COBRA statute and regulations are permissive; through the statute and regulations they argued that the word “shall” should be understood to mean “may.” Therefore, they contended that meant an alternate method of notification should be allowed. The court found this argument to be absurd – substituting the word “may” for “shall” would make it possible for an employer to decide whether or not to properly inform employees and their qualified beneficiaries of their continuing coverage rights. Needless to say, the court ruled in favor of the plaintiffs in this case and Northwestern was held liable for reimbursement of medical expenses, statutory penalties, attorney’s fees, etc.

In this authors opinion this case illustrates the importance of ensuring both the general notice and the election notice include specific information in order to be COBRA compliant. You must include the name of the plan and contact information in order for the individuals to seek help with any COBRA questions they may need answered. You must identify the type of qualifying event involved and name the qualified beneficiaries that are affected by this event. The date that their active coverage will terminate must be mentioned as well as a statement of their various rights in electing COBRA coverage. The procedures for electing COBRA coverage must be explained with specific dates with regards to the election time period and deadlines. The ramifications of failure to elect COBRA must be clearly spelled out. Finally, a description of the COBRA coverage should be included, along with details of the premium requirements, i.e. amounts and due dates. Make sure to periodically review your notices in order to verify all the pertinent information required has been included. As evidenced in this case, a simple notice without the proper verbiage will not suffice.