Cobra Issues

May 10, 2012 — 1,650 views  
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Cobra gives the recently unemployed the opportunity to continue the health insurance coverage they had from their employer. Because coverage involves the employer, HR needs to be able to respond to the request for continuation of coverage. The government does not get involved with the employee and employer in the continuation of the coverage, so HR needs to be able to navigate Cobra effectively in order to avoid problems.

The law requires that all employees who qualify be notified of their Cobra coverage option. Proper and adequate notification of Cobra coverage is necessary to avoid issues later. A court case cost one company $300,000 in damages and additional lawyers' fees because they failed to notify the individual of his right to continue health insurance. HR staff needs to make sure that the employee receives the information in a way that complies with the law.

Notification also includes information for the way in which continuation is offered, how a qualified individual can choose to continue coverage, and at what point in time it can be terminated.

Another issue is determining eligibility for former and current employees. In general, anyone who loses their coverage, regardless of employment status, is eligible to continue coverage via Cobra. The only qualifier for coverage is that the employee has to be working at a business that has 20 or more employees. Cobra also covers spouses and dependents, which creates a cascade effect of who, when, why and how for eligible individuals. An example of one of the more complicated aspects of eligibility is when a dependent ages out of coverage. That dependent is now eligible for coverage under Cobra due to the fact she lost benefits when she aged out.

Make it a point that HR staff is clear on what defines an event that starts Cobra coverage. There are only two qualifying actions that start Cobra coverage for employees. One is termination and the other is a reduction in hours of employment that causes a loss of coverage. The issue becomes more convoluted in the case of spouse and dependents as previously noted.

These are just some of the issues that come with Cobra. HR staff needs to read the act and how it is applied in order to avoid issues later. Proper utilization of the act ensures that both employer and employee give and receive coverage correctly.