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COBRA

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					COBRA Administration
     Training




              By: Brett Koenig
Contents

 I. Define COBRA
 II. State Continuation Programs
 III. COBRA: A-Z
 IV. Paychex COBRA Administration
  Service
 V. Paperwork
What is COBRA?

   The federal Consolidated Omnibus Budget
    Reconciliation Act (COBRA) requires group health
    plan sponsors to provide covered employees and
    their beneficiaries with the opportunity to continue
    health coverage if it is lost due to a qualifying event.
   COBRA Administration involves notification of
    covered employees, their spouses, and dependents
    of their rights under COBRA, and the collection and
    payment of participants’ insurance premiums.
What is COBRA?

COBRA generally applies to employers:
• With 20 or more employees (both full-
  time and part-time) on 50 percent of the
  typical business days during the
  previous calendar year.
• Who offer a group health plan.
Client Data

   About 30 percent of Paychex payroll clients.
   About 20 percent of all clients have 20 or
    more employees.
COBRA Eligibility & State Continuation

                    Employee
                    Employee’s
                     Spouse
                    Dependent
                     Children
Who Pays

 COBRA participants pay the entire
  premium plus a 2 percent
  administration fee.
 COBRA insurance is usually less
  expensive than individual health
  coverage because the premium is
  usually at a group rate.
State Continuation Laws

 Many other states have their own
  insurance laws. The state laws
  primarily extend COBRA-level benefits
  to businesses with fewer than 20
  employees.
 This includes Wisconsin & Illinois.
State Continuation Laws

 Illinois- Plans with 2 or more employees
  qualify for 9 months or 2 years
  depending on the qualifying event.
 Wisconsin- Plans with 1 or more
  employees qualify for 18 months.
 Indiana- Employees can purchase
  “Comprehensive Health Insurance”
State Continuation
                                                                    IL                             WI
            Minimum # of EEs                                        2                               1
              Qualified Plans                                 Health Only*                     Health Only*
             # of Days to Elect                                  10 days                         30 days
      Qualifying Event: Termination                             9 months                       18 months
     Qualifying Event: Illness or Injury                        9 months                       18 months

    Qualifying Event: Temporary Layoff                          9 months                       18 months

   Qualifying Event: Reduction in Hours                         9 months                       18 months
      Qualifying Event: Death of EE                              2 years                       18 months
Qualifying Event: Change in Marital Status                       2 years                       18 months
  Qualifying Event: Medicare Entitlement                        9 months                            -
Qualifying Event: Loss of Dep. Child Status                      2 years                       18 months
         Prior Coverage Required              3 months for termination & reduction in hours.    3 months
                                                  1 day for all other Qualifying Events.

      * We are able to offer dental & vision w/ permission from the carrier, but the employer
                                      is not required to do so.
COBRA:                           A-Z

                            QUALIFYING EVENTS
    EMPLOYEES                          SPOUSES                              DEPENDENT
                                                                             CHILDREN
•Voluntary or involuntary    •  Covered employee’s voluntary or       •  Loss of dependent child status
     termination of         involuntary termination for any reason     • Covered employee’s voluntary
  employment for any              other than gross misconduct         or involuntary termination for any
reason other than gross             • Reduction in the covered                reason other than gross
      misconduct                      employee’s work hours                          misconduct
                             • Covered employee becomes entitle             • Reduction in the covered
                                           to Medicare                         employee’s work hours
                             • Divorce or legal separation from the     • Covered employee becomes
                                        covered employee                        entitled to Medicare
                                  • Covered employee’s death            • Divorce or legal separation of
                                                                               the covered employee
                                                                          • Covered employee’s death
Coverage Period

   COBRA coverage can continue for up to 18 months. Coverage may
    extend to 36 months for divorce, legal separation, loss of dependent
    status, and the death of the covered employee.
           COVERAGE PERIOD                      QUALIFYING EVENT
                18 months         • Reduction in hours
                                  • Termination (other than for gross conduct)

                36 months         • Divorce or legal separation from a covered
                                  employee
                                  • Child’s loss of dependent status
                                  • Death of a covered employee

            Additional Coverage   • Up to 29 months total for disability
                                  • Up to 36 months total for multiple qualifying
                                  events
                                  • Up to 36 months total for Medicare
                                  entitlement
Notifications

   60 Days - Qualified beneficiaries have 60 days from the date
    of the qualifying event to notify the employer of divorce, legal
    separation, or loss of dependent status.
   30 Days - Employers must notify the plan administrator
    within 30 days of a termination or learning of qualifying
    event.
   14 Days - The plan administrator had 14 days to notify the
    qualified beneficiaries of their right to continue health
    insurance coverage under COBRA.
   60 Days - Qualified beneficiaries have 60 days after
    receiving notification to decide whether to elect COBRA.
   45 Days - Qualified beneficiaries have 45 days after electing
    coverage to make the first premium payment.
Penalties

   Failure to comply with COBRA may result
    in penalties under the Internal Revenue
    Code, the Employee Retirement Income
    Security Act, or the Public Health Service
    Act.
   Internal Revenue Service has a staff of
    auditors dedicated to COBRA audits to
    verify compliance.
Penalties

Employers in violation of COBRA may be subject to:
• An excise tax of up to $100 per beneficiary and
  $200 per family for each day of a violation, up to a
  maximum of $255,000.
• An ERISA penalty of $110 per day payable to each
  qualified beneficiary.
• Payment of legal fees, court costs, and medical
  claims incurred by a qualified beneficiary.
 COBRA Service Features & Benefits
                                FEATURE                                                              CLIENT BENEFIT
COBRA Administration performs all day-to-day tasks to meet COBRA and                                •convenience & time savings
state requirements                                                                                   •accuracy & peace of mind



COBRA Administration ensures compliance with COBRA and state                                              •peace  of mind
continuation laws.                                                                                     •avoid costly penalties

 Notices are sent to the primary beneficiary and qualified dependents by the                               •time   savings
legal deadline. Client notices are copied to the HR representatives.                                      •peace    of mind

Paychex sets up the COBRA and state continuation administration plans.                                     •convenience
                                                                                                           •time   savings
Employees have access to COBRA enrollment forms.                                                           •Convenience

Client may select a payroll provider other than Paychex.                                                   •more   options
COBRA Administration bills participants, collects the payments, and sends                                  •time  savings
the payment to clients. In general, Paychex pays the carrier directly only if                               •convenience
Paychex administers a client’s health plan.                                                           •timely carrier payments

For payroll clients, terminations automatically feed to HRS from the payroll                                 •efficiency
system, however; additional information is required from the client.                                         •accuracy
                                                                                •clients   do not complete Employee Data Sheets for terminations

Activity Report of current COBRA participation. Copies are sent to HR                                        •accuracy
representatives.                                                                                           •convenience
COBRA Service

 Confirmation, reinstatement, and
  termination notices are automatically
  sent to clients nightly.
 Clients receive refunds more often than
  monthly.
 Federal and state compliance
  measured annually.
                     COBRA Administration

     EMPLOYEE/ CLIENT                                         COBRA ADMINISTRATION
New employee enrolls in client’s insurance    Sends COBRA Initial Notification letter to new employee regarding their
                plan.                         rights under COBRA.
    Employer notifies Paychex of the          • Sends COBRA Notification and Enrollment Packet to qualified
  qualifying event by mailing or faxing a     beneficiaries within 14 days.
     COBRA Employee Data Sheet.               • Emails or faxes COBRA Confirmation Letter after receiving COBRA
                                              Employee Data Sheet.
Qualified beneficiary has 60 days to decide   •Notifies client of qualified beneficiary’s decision to elect COBRA
   whether to elect COBRA coverage.           coverage.

   Participant has 45 days (may vary by       • Collects monthly COBRA payments.
  state) after election to make the initial   • Sends Reinstatement Notice to client and advises client to contact
  COBRA payment, then makes monthly           carrier to reinstate employee’s insurance.
           payments to Paychex.               • Payments sent to clients with non-Paychex health plan; client pays
                                              carrier.
                                              • Payments sent to the carrier if the client has a Paychex health plan.

  Participant either discontinues making      • Sends reminder notice to participant if payment not received.
  COBRA payments or loses eligibility to      • Emails or faxes COBRA Termination Notice to client if payment not
       continue COBRA coverage.               received or participant loses COBRA eligibility.
                                              • Reminds client to contact carrier to terminate COBRA insurance
                                              coverage.
Target Market

Paychex COBRA Administration will be sold to:
• Prospects with 20 or more employees who offer health
  insurance.
• Prospects with fewer than 20 employees in the 41 states
  with health insurance continuation laws.
• New payroll clients
• Current Clients with pre-tax or post-tax health deductions
  being referred to HRS for FSA.
• Non-payroll clients
• Any business being referred to the Paychex Agency for
  Health Insurance.
Other Factors

 Employee   Turnover
 No human resources staff
 Has a human resources staff that
  does not have the time to
  administer COBRA or state
  continuation laws.
Needs Analysis


   Who in your company is responsible for handling COBRA?
   How does your company ensure compliance with COBRA?
   How do you know if you are in compliance?
   Walk me through your process of offering COBRA when an
    employee, spouse, or child becomes eligible for the
    program?
   When do you make your employees aware of their COBRA
    rights?
   What if you didn’t have to worry about COBRA compliance
    paperwork and notifications?
   Would you see that as a benefit?
Pricing

               COBRA Standalone
                                    POP
                 CORE   MMS       BUNDLE
                                   CORE
 FLAT FEE         $20    $65        $50
    Per
  COBRA           $5     $5         $5
 Participant
Additional Information

   COBRA Administration may be sold in combination
    with Paychex Flexible Spending Accounts or
    Premium Only Plans.
   COBRA Administration is billed on the HRS invoice.
   Commissions for selling COBRA Administration are
    based on the regular PAR revenue credit structure
    and all current accelerators apply.
   All client information must be received by HRS or
    scanned (MMS and Core) by the 20th of each month
    for an effective date of the first of the following
    month.
Field Support Line

   The COBRA Field Support Line has been
    created for Sales Representatives, DSMs,
    and any other field sales personnel.
   Field personnel may call this line Monday
    thru Friday, from 8:00 am to 5:00 pm EST.
   The number is 888-401-5727, option 5, and
    then option 3.
Wrap Up

   Paychex offers both COBRA and state continuation
    administration, which helps business of all sizes
    comply with state and federal regulations.
   Paychex provides complete administrative services,
    including setup, timely notices to participants, and
    payment processing.
   Paychex provides toll-free support for clients and
    participants. The number is 800-472-0072, option 4.

				
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