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.