COBRA Articles

There's no question – insurance brokers have tough jobs. It's difficult to sell something that is invisible, expensive, and generally confusing. COBRA makes the job even more challenging. The law is complex and involves costly fines and litigation. It's no wonder that some brokers sidestep the COBRA administration conversation. This may seem like a safe strategy because after all, the employer is ultimately responsible for COBRA administration. But in reality, one small COBRA misstep can result in adverse consequences for both you and your client. Don't fall into the COBRA pit. Protect yourself and your clients by avoiding the four most common COBRA pitfalls.

Pitfall #1: COBRA responsibility assumptions
Although COBRA is an employer law, employers often look to their brokers for direction regarding COBRA administration. As a result, clients often believe that their broker manages their COBRA administration. This is a big misconception and should be explicitly addressed. As a broker, make it clear that you're not a COBRA administrator. Collaborate with an expert COBRA administrator to protect you and your clients' interests.

An additional example of great COBRA solutions is to add another layer of protection by presenting clients with a waiver of liability. The waiver states that you've informed the employer about the risk of oversights when self-administering COBRA or not having a good automated COBRA administration plan in place. It also states that after receiving the information, the client declined to use a COBRA administrator. By presenting the waiver of liability for the client to sign, you protect yourself and put the group on notice that you're not managing COBRA for them. When people sign the waiver, they think twice about their decisions. Clients realize that self-administering COBRA is an important decision and a challenging proposition.

Pitfall #2: COBRA invoice oversights
Many employers are not in the habit of regular account reconciliation for their active employees, and this is especially likely when it comes to COBRA participants. Employers should account for everyone on carrier bills and validate each person on a monthly basis. If an employer doesn't know who the participant is or why the participant is listed on the bill, he needs to find out. Brokers should advise employers not to just take the carrier's word for it. The carrier may have made a mistake and inadvertently left someone on the bill even after being instructed otherwise.

If a COBRA participant is on the group bill and shouldn't be, act quickly. An employer has only a short window of opportunity to recover money since most carrier look-back periods are 30 to 60 days. If someone should be on the bill and was left off by mistake, be prepared to back-pay premiums when you reinstate. Take care of it when it happens because, like an IRS tax penalty, it only gets more complicated as time passes. Believe it or not, our experience tells us that an incredible number of employers overpay premiums by thousands or tens of thousands of dollars each year because of carrier billing mistakes that are never caught or reconciled.

Pitfall #3: COBRA dumping
It's fairly common for employers to forget about COBRA participants during open enrollment. COBRA participants get lost in the shuffle as employers busily chase active employees and new hires to provide annual enrollment information. That's why it's important to get a copy of the group bill along with the group census. Take a good inventory of the bill, before and after open enrollment. For even better results, go back a few months to capture all of the COBRA-pending participants and ensure they are on the current bill or have been removed.

Employers also need to be diligent when there's a change in the carrier or administrator. Often, COBRA participants and retirees are overlooked. Remind your clients to carefully review and reconcile bills anytime there's a change, and validate each person from top to bottom.

Pitfall #4: COBRA misconceptions
Some employers have heard, and mistakenly believe, that COBRA is no longer required as a result of the new healthcare law. This is wrong. The health reform law did not eliminate or change the COBRA rules, but instead makes them more complicated. There's also a belief that since there will be no pre-existing condition exclusions for all health plans beginning in 2014 and everyone will be required to have health insurance, nobody will need COBRA. This is a dangerous assumption since reform did not eliminate the employer-based system of health coverage. Most studies indicate that the vast majority of Americans will continue to rely on employer-based group coverage in the coming years. As long as there is employer-based coverage, the need for COBRA (and state continuation) will continue. Make sure to broach the COBRA topic and inquire about your clients' current administration situation.

When it comes to COBRA and your clients, don't leave anything to chance. Take a proactive stance, and work to skew the odds in your favor. By avoiding the four most common COBRA pitfalls, you'll help protect yourself, safeguard your employers, and improve your client relationships.

Robert Meyers has more than 20 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 www.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.