The document provides a summary of the top 10 mistakes employers make regarding COBRA and how to avoid them. It discusses mistakes like assuming COBRA doesn't apply to small employers or certain health plans, not understanding qualifying events and beneficiaries, failing to provide required notices, not following reasonable procedures, providing incorrect information in notices, not maintaining proper documentation, and bad timing of coverage periods. The document emphasizes the importance of understanding COBRA requirements, establishing procedures, sending timely and accurate notices, properly documenting actions, and avoiding mistakes that could result in penalties.

1. TOP 10 COBRA MISTAKES
(AND HOW TO AVOID THEM)
Brett Webster – AH&T Insurance
(206) 770-3051 - bwebster@ahtins.com

2. Introduction to COBRA
 Consolidated Omnibus Budget Reconciliation
Act
 COBRA continuation coverage = temporary
continuation of health coverage at group rates
 Available to “Qualified Beneficiaries” upon
occurrence of “Qualifying Events”

3. COBRA Penalties
 IRS excise taxes
 ERISA - $110 statutory penalties
 Lawsuits to compel coverage (and pay
attorneys’ fees!)
 Adverse selection
 Inability to terminate coverage

4. #10 – Assuming COBRA Doesn’t
Apply to You
 COBRA applies to group health plans for
employers with 20 or more employees
 Small employer exemption
 Rule is – 20 or more employees on more than
50% of typical business days in the previous
calendar year
 Count full-time and part-time employees
 Part-time employees = fraction

5. #9 – Assuming COBRA Doesn’t
Apply to Your Plan
 COBRA applies to group health plans maintained
by employers
 Health plans subject to COBRA:
 Medical, dental, vision and Rx plans
 Drug and alcohol treatment program
 Employee assistance plans that provide medical care
 On-site health care
 Health FSAs and HRAs
 Self-funded medical reimbursement plans
 Wellness programs that provide medical care

6. #9 – Assuming COBRA Doesn’t
Apply to Your Plan
 Health plans not subject to COBRA:
 Long-term care plans
 AD&D plans
 Group term life insurance plans
 LTD & STD plans
 Wellness programs or employee assistance programs that do not
provide medical care
 Exercise or fitness centers
 Onsite first-aid facilities
 Cancelling plan doesn’t always cancel COBRA
responsibility
 If employer continues to provide any group health plan, obligation to
provide COBRA coverage continues

7. #8 – Not Knowing Your Qualifying
Events or Qualified Beneficiaries
 Qualifying events trigger COBRA coverage for
qualified beneficiaries (QBs)
 Who is a QB?
 An individual covered by a group health plan on the day
before a qualifying event
 Employee, employee’s spouse, employee’s dependent
children
 Sometimes includes retired employee and spouse and
dependent children
 Any child born to or placed for adoption with covered
employee during COBRA coverage period
 May include agents, independent contractors and directors

8. What is a Qualifying Event?
 Elements of a qualifying event:
 Specified triggering event
 Causes (or will cause) a loss of coverage
 Within maximum coverage period
 While the plan is subject to COBRA
 Loss in anticipation of events
 FMLA Leave
 Pay attention to plan terms for eligibility – listed
event may not cause a loss of coverage, individual
may not be QB

9. What is a Qualifying Event?
 Qualifying events for employees:
 Termination of employment (for reasons other than gross
misconduct)
 Reduction in hours of employment
 Qualifying events for spouses:
 Termination of covered employee’s employment (for any
reason other than gross misconduct)
 Reduction in hours of covered employee’s employment
 Covered employee becoming entitled to Medicare
 Divorce or legal separation from covered employee
 Death of covered employee

10. What is a Qualifying Event?
 Qualifying events for dependent children:
 Loss of dependent child status under plan rules
 Termination of covered employee’s employment (for
any reason other than gross misconduct)
 Reduction in hours of covered employee’s
employment
 Covered employee becoming entitled to Medicare
 Divorce or legal separation of covered employee
 Death of covered employee

11. #7 – Giving No Information
 Plan Administrators are required to provide certain
information to plan participants and beneficiaries and
QBs
 COBRA Notice Rules - set minimum standards for timing
and content of notices required under COBRA
 applicable to calendar-year plans on January 1, 2005
 Provided model notices and added two new notice
requirements (unavailability and early termination)
 Require reasonable procedures for providing notices
 Did not affect substantive COBRA rules
 Not providing timely/proper notices puts plan at risk
 Avoid problems by establishing procedures for sending
notices

12. COBRA Notices – General Notice
 Provides information to plan participants regarding
COBRA and plan procedures
 Must be provided within 90 days after plan coverage
begins
 Must be written to be understood by average plan
participant
 May be provided in Summary Plan Description
 Single notice can be provided to employee and spouse
at same address
 Content specified in regs – model notice available

13. COBRA Notices – Election Notice
 Gives QBs information about rights and obligations
regarding a specific qualifying event and coverage
 Must be provided to QBs within 14 days after plan
administrator is notified of Qualifying Event
 If employer is plan administrator, notice must be
provided within 44 days of qualifying event or loss of
coverage (whichever is later)
 Content specified in regs - model notice available

14. COBRA Notices –
Notice of Unavailability
 Plan administrator must notify individual with explanation
of why s/he is not entitled to COBRA coverage
 No Qualifying Event had occurred
 QB did not furnish required notice
 QB did not provide complete information
 Deadline is same as that for sending election notice
 Generally must give notice of COBRA ineligibility within
14 days after receipt of notice of Qualifying Event

15. COBRA Notices –
Notice of Early Termination
 Plan administrator must notify QBs when
continuation coverage terminates before the end of
the maximum coverage period
 Timing – must notify as soon as practicable
 Must contain the following information:
 Reason for early termination
 Date coverage terminated or will terminate
 Available conversion rights

16. COBRA Notices – Employer’s
Notice of Qualifying Event
 Employer must notify plan administrator within 30 days
of the later of qualifying event or loss of coverage
 Notice must be given of employee’s death, termination
of employment, reduction in hours of employment,
Medicare entitlement
 Must include sufficient information to determine plan,
employee, qualifying event and date
 No notice necessary where employer is plan
administrator

17. #6 – Giving Bad Information
 General Notice – Required Content
 Plan name
 Name, address and phone number for contact person for
information about the plan and COBRA
 Description of COBRA coverage under the plan
 Plan procedures for QBs to provide notice of certain
qualifying events
 Plan procedures for QBs to provide notice of SSA
determination of disability
 Statement that notice does not fully describe COBRA or
other rights and plan administrator and SPD can provide
more info
 Importance of advising administrator if address changes
 Model notice available

18. #6 – Giving Bad Information
 Election Notice – Required Content
 Plan name and name, address and phone number for
contact person for information about the plan and COBRA
 Identification of the qualifying event
 Date plan coverage will terminate
 Identification of the QBs by status or name
 Statement that each QB has independent right to elect
coverage
 Description of COBRA coverage
 Amount each QB required to pay and procedures for
making payments

19. #6 – Giving Bad Information
 Election Notice, continued
 Explanation of how to elect coverage and date by which election
must be made
 Consequences of failing to elect or waiving COBRA
 Explanation of duration of COBRA coverage
 Explanation of circumstances where coverage may be extended
 QB’s responsibility to provide notice of second qualifying event
or SSA disability determination (including procedures for
providing notice)
 QB’s responsibility to provide notice of determination that QB is
no longer disabled
 Explanation of importance of keeping plan administrator
informed of current address
 Statement regarding more complete information

20. #5 – Not Following Procedures
 Plans must establish reasonable notice procedures for
covered employees and QBs to notify plan of certain
events
 Qualifying events: divorce, legal separation, dependent
child losing dependent status
 Second qualifying events
 SSA disability determination (or cessation of disability)
 Consequences of not having reasonable procedures
 QB deemed to have given notice if s/he has communicated
a specific event in a manner reasonably calculated to
inform those customarily considered responsible for the
plan

21. Reasonable Notice Procedures
 Described in SPD
 Specify individual or entity designated to receive notices
 Specify how notice is to be given
 May require use of specific form
 Must allow covered employee, QB or representative to
provide notice
 Describe the information required
 Specify deadlines for providing notice
 Provide for proper handling of incomplete notices

22. COBRA Notices – Employee’s
Notice of Qualifying Event
 Covered employees and QBs are generally required
to notify plan administrator within 60 days of the
later of:
 Qualifying event or second qualifying event,
 Loss of coverage or
 Date they were first notified of notice obligations
 Prompt notification decreases risk to plan

23. COBRA Notices – Employee’s
Notice of Disability Determination
 QBs determined to be disabled by SSA are
generally required to notify plan administrator within
60 days of receipt of disability determination and
before end of original 18-month continuation
coverage period
 QBs must notify plan administrator within 30 days of
determination that they are no longer disabled

24. COBRA Election Procedures
 QB must be given at least 60 days to elect COBRA
 Election period begins on date election notice is
provided or date on which coverage would be lost
(whichever is later)
 Each QB has independent right to elect COBRA
 Covered employee or spouse can elect on behalf of all
other QBs and parent or guardian can elect on behalf of
minor child
 If QB waives coverage during election period, s/he can
revoke waiver before end of election period

25. Payment Procedures
 Plan can require payment of “applicable premium” for
COBRA coverage
 102% of employer’s cost
 150% for disabled QBs
 Premium payments must be made in a timely manner
 Payment = made when sent
 Initial premium = due 45 days after election
 Premium due date is usually 1st of month – plan must allow 30
day grace period
 Late payments and short payments
 Forwarding payments to insurers

26. #4 – Not Giving Enough Coverage
 Continuation coverage provided to QBs must be the
same as coverage provided to “similarly situated”
individuals covered under the plan (not receiving
COBRA coverage)
 Intended to be the same coverage the QB had before
the qualifying event
 QBs entitled to same benefits, rights and privileges that
similarly situated participant or beneficiary receives
under the plan
 Changes to plan’s terms that affect similarly situated
participants and beneficiaries apply to QBs receiving
COBRA coverage

27. #3 – Charging Too Much or Too Little
 Group health plans can require QBs to pay for COBRA
coverage
 May choose to provide coverage at a discount or no cost
 Maximum COBRA premium cannot exceed 102% of
cost to plan for similarly situated plan participants
 Disabled QBs receiving disability extension may be
charged up to 150% of the plan’s total cost of coverage
 COBRA premiums may be increased if plan cost
increases, but must be fixed in advance of each 12-
month premium cycle

28. #2 – No Documentation
 Notice information and procedures – document in SPD
and notices
 Document notices sent
 Certificate of mailing
 Business records method
 Keep records of notices received
 Document payments received
 Accurate and thorough records will assist in
administration and support plan in event of a claim

29. #1 – Bad Timing
 Maximum coverage period
 18 months for termination of employment and reduction in
hours
 36 months for death of covered employee, divorce or
separation, covered employee’s entitlement to Medicare
 Can be extended or terminated early
 Special rule for newborn/adopted children – maximum
coverage period is the remainder of the original
maximum coverage period

30. Expanding COBRA Coverage
 Extended notice rule ➨ permits maximum coverage
period to run from date of loss of coverage, not date
of triggering event
 Disability extending rule ➨ extends 18-month period
to 29 months for all related QBs
 Multiple qualifying event rule ➨ extends 18-month
period to 36 months for spouse and children when
2nd qualifying event occurs during initial 18-month
period

31. Expanding COBRA Coverage
 Medicare entitlement rule ➨ extends 18-month
period for spouses and children when covered
employee becomes entitled to Medicare within 18
months before triggering event
 Bankruptcy of sponsoring employer ➨ extends
coverage for retired employee, spouse and
dependent children

32. Terminating COBRA Coverage
 COBRA coverage generally terminates at end of
maximum coverage period
 No notice to QB required
 COBRA may be terminated early if:
 QB fails to make timely premium payments
 Employer ceases to make any health plan available to any
employee
 QB becomes covered under another group health plan
 Disabled QB is determined not to be disabled
 For cause
 Notice required for early termination

33. QUESTIONS???

34. Thank You for Your Participation!
Content © 2009-2010 Zywave, Inc. All rights reserved. Rev. 12/09, 6/10 ES