COBRA Articles
The Mini-COBRA Update: Small Employers Need to Be Informed and In COBRA Compliance
While federal COBRA laws apply to employers with 20 or more employees, mini-COBRA applies to employees of firms with fewer than 20 workers who would not otherwise be covered by federal COBRA. Eligibility rules, rates, and the duration of benefits allowed under mini-COBRA are often different than those dictated by federal COBRA. Federal COBRA has a preemptive clause, so as a general rule, federal rules should be followed first and state rules followed second. In some cases, the two laws don't dovetail and administration becomes extremely complex.
As of January 2010, more than 40 states had mini-COBRA laws in effect. Chances are high that many of your small employers are out of compliance. "Employers with less than 20 workers are no longer safe," says Missouri ERISA attorney Amy Grace. "Many of the state mini-COBRA laws mirror the federal laws, especially since the enactment of American Recovery and Reinvestment Act (ARRA). The new mini-COBRA laws extend notice requirements and penalties to small employers." According to StateHealthFacts.org, there are also many complex exceptions, creating an administrative headache. Here are a few examples from the website:
Six states have continuation laws that extend, for certain individuals (generally 55 and older), following certain qualifying events, continuation coverage to the time when the individuals are eligible for Medicare. These states include Illinois, Louisiana, Maryland, Missouri, New Hampshire, and Oregon. In addition, in New Mexico, group plans offered through the New Mexico Health Insurance Alliance continue coverage indefinitely.
In New Jersey, individuals considered "disabled," under some circumstances, may continue coverage until they are no longer considered disabled.
In Oregon, in the case of separation, divorce, or death of the insured, insurers are permitted to charge 102 percent of the group rate.
In South Dakota, the premium to continue coverage after 18 months increases to 150 percent.
In Virginia, insurers have the option of offering either continuation or conversion.
How brokers can prepare small groups:
To educate yourself about the mini-COBRA requirements for your state, check with your state's Department of Insurance. For a quick overview of state requirements, visit www.statehealthfacts.org/comparetable.jsp?ind=357&cat=7. A full state-by-state mini-COBRA administration guide will also be available soon at www.cobraanswers.com.
Make sure your small employer clients have a current Summary Plan Description (SPD) that reflects the continuation provisions in effect for your state or federal COBRA, whichever is applicable.
If your clients use a COBRA administrator to comply with federal requirements, check if there's also a system in place for complying with any applicable state COBRA compliance requirements. Usually these requirements apply in addition to federal COBRA compliance requirements, if the requirements go beyond COBRA. Remember, federal requirements generally preempt state requirements.
Use a waiver of liability to help protect yourself from miscommunication and potential E&O claims. The waiver states that you've informed the employer of COBRA-related obligations. By presenting a waiver of liability for a client to sign, you protect yourself and put the group on notice that you're not managing COBRA.
Are your employers ready for this? Many employers have no idea these changes have occurred. Furthermore, they will not be accustomed to handling the time-intensive administrative functions of sending notices, collecting premiums, and tracking participants for either state or federal COBRA. If an employer is short on HR power, or has major layoffs in the works, you may want to encourage outsourcing the COBRA administration function. By keeping your clients informed and prepared, you'll help them avoid expensive oversights, and you'll stand out as a professional, reliable partner.
Robert Meyers has more than 25 years of experience in business management and COBRA. He is the founder and president of Kansas-based COBRA administrator COBRAGuard. For questions or more information, please visit COBRAGuard.net or email Robert at robert.meyers@cobraguard.net.
About COBRAGuard Inc. COBRAGuard Inc. is a certified COBRA administrator (CCA), helping employers control risks and liabilities, prevent adverse claims, and save time and money. The company serves more than 3,000 organizations nationwide and it stands behind its services with a 100 percent compliance guarantee. For more information, visit the company's website at www.cobraguard.net.
Have a question about our online COBRA administration system? Contact our sales team.