What is COBRA?

What Employers Should Know

COBRA is a federal law that requires employers with 20 or more employees to offer continuing coverage to individuals who would otherwise lose their health benefits due to termination of employment, reduction in hours or certain other events. Individual states may also have COBRA-like laws that apply.

If you are subject to COBRA, and if you have a group health plan, you have to provide COBRA benefits to qualified beneficiaries. A qualified beneficiary is anyone covered under your group health plan on the day before an event that causes loss of coverage. Beneficiaries include employees, including part time employees if they participate in your plan on the day before the qualifying event, their spouses, their dependents, retirees (unless they are eligible for Medicare) and partners in a partnership.

The following types of plans generally need to be offered to employees when COBRA is triggered: health care plans, dental plans, vision plans, hearing plans, and prescription drug plans. Under federal law, life insurance, disability insurance, and retirement plans are not plans that you must extend to people entitled to COBRA coverage. Although state laws may require some or all of these plans to receive COBRA like benefits. For example, Minnesota has a COBRA-like law that requires group life insurance be extended to qualifying COBRA individuals.

COBRA Audits from the IRS

COBRA compliance is monitored and enforced by IRS audits.

Financial Consequences. Noncompliance may result in significant risks to the employer, including penalties for not providing notices in a timely manner or for any potential recovery of benefits should an employee demonstrate that an employer failed to provide an individual the opportunity to elect continuation. In addition, employers who do not comply may be subject to various financial penalties as described below:

• $100 per day IRS excise tax penalty for each violation, which can increase to $200 per day when
  the violation affects a family.
• A $110 per day ERISA penalty payable to each Qualified Beneficiary for each day the employer
  was not in compliance
• Legal costs associated with court costs, legal feed, and even for medical claims incurred by a
  Qualified Beneficiary.

Audit Items. If you are subject to an IRS audit, you may be required to produce copies of the following documents: COBRA Procedures Manual, notification letters to qualified beneficiaries, evidence of internal audit procedures, group health care plan information, and details pertaining to any past or pending lawsuits filed against the employer for failing to provide appropriate continuation coverage.

Outsourcing Your COBRA Administration

Complying with COBRA can be a very taxing job. Companies of all sizes can save time and money by outsourcing administration to Benafica, which specializes in COBRA Administration. The complicated issues involved, particularly if you have more than a few employees, is a very good reason to consider outsourcing your administration duties.

Benafica’ s Commitment

Benafica’ s commitment extends not only to you as the employer, but also to your employees (both current and former employees).

As an employer you’ll feel confident that your organization is compliant in all matters related to COBRA administration. And you’ll also feel confident that both your current and former employees are being treated with the highest level of professionalism.

Benafica’s Technology

Benafica’ s COBRA administration system is powered by our proprietary software system.

This modern technology allows for:

• Customer Support tickets and tracking
• Cloud based document storage of all documents and key communications
• Auto-generated multi-carrier billing and late notices
• Auto-generated remittances back to the Employer
• Web portal for Employer reporting of benefit changes