Having health insurance is critical in this time of rising medical costs. Many employees enjoy access to insurance through employer-offered plans. But what happens when employee is terminated? The Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA”) provides relief to employees in danger of losing health insurance due to a qualifying event like the loss of a job. However, that relief comes at a cost to employers now forced to comply with COBRA regulations that include strict requirements regarding notices. In fact, COBRA regulations require employers to provide several required notices to employees, former employees, and their dependents or face penalties and taxes
Notice Requirements –
Employers and plan administrators must send certain notices to employees in a timely manner:
General Notice to Covered Individuals/ Initial Notice –
Employers provide employees with a description of their COBRA rights within 90 days after they become participants. This is generally included in a Summary Plan Description (SPD).
Notice of Qualifying Event –
The employer provides this to plan administrator within 30 days of employee’s last day at work.
COBRA Election Notice (employee) –
Plan administrator has to notify employee within 14 days.
COBRA Election Notice (qualified dependents) –
It may be necessary to notify individual qualified beneficiaries unless they live with the employee participant.
Notice of Early Termination –
This notice must be sent to a participant as soon as is practical if COBRA coverage will be terminated before the end of the period of coverage.
Notice of Termination for Nonpayment –
Participants must be notified within 30 days of termination.
Notice of Unavailability of Continuation Coverage / Notice of COBRA Ineligibility –
This is provided to people 14 days after a Notice of Qualifying Event has been submitted notifying them that they are not eligible for COBRA.
Notice of Underpayment of COBRA premium –
If a COBRA participant’s payment is less than the required amount, they must be notified within 30 days before coverage is terminated.
Notice of Exhaustion –
Participants are to be notified within 30 days of the end of COBRA coverage.
Extension Notification –
Plans may be extended for 11 months if a disabled beneficiary in the family meets certain other requirements. A COBRA plan beneficiary may receive an 18-month maximum period of continuation coverage upon the occurrence of a second qualifying event including death of the covered employee, divorce, legal separation, Medicare enrollment, or loss of dependent child status.
Premium Billing Notice –
A letter reminding the covered employee of the premium amount and due date may be sent. Additionally, the plan must notify the beneficiary of underpayments and give them at least 30 days to bring their payments current.
Open Enrollment Notice –
Employers should send COBRA participants the same open enrollment notice sent to active employees.
COBRA Non-Compliance Can Be Costly
Both the Department of Labor and the Internal Revenue Service levy penalties against non-compliant employers. For example, employers may be assessed a non-deductible tax penalty of $100 per day, per affected individual, per COBRA violation.