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A Service of OnQue Technologies, Inc. |
| What You Need to Know When Your Carrier is
Administering COBRA |
July 14, 2005
By Bud Martin, CEO
OnQue Technologies, Inc.
Santa Rosa,
CA |
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Assisting
employers with COBRA administration is a common practice among carriers today.
Although some employers find such services appealing, many are unaware of one
very important fact: they cannot outsource their accountability for being in
compliance with COBRA. According to the law, COBRA is the responsibility of the
plan administrator alone, which is typically the employer, and no written
agreement or promise can change that fact. Thus, those who are ultimately
responsible for COBRA administration must make sure they know exactly what role
their carrier or TPA is assuming. This COBRA Tip presents the key issues you
must consider when evaluating your carrier's administrative
services.
The Three Most Common Levels of
Service
The three levels of COBRA services typically
offered by insurance carriers are:
- Billing and premium
collection;
- Administration after COBRA is
elected; and,
- Administration after a COBRA
qualifying event.
Outsourcing COBRA Premium
Billing & Collection
The most common COBRA related role offered by
insurers is the collection of monthly premiums. Although employers are not
legally required to send monthly bills to qualified beneficiaries (see
COBRA Billing: Is It
Required?), they are frequently delighted to learn that the carrier is
willing to shoulder that responsibility. On the surface, it appears that having
the carrier bill COBRA participants is a great idea. However, there are many
good reasons to think twice before allowing any outside entity to handle
COBRA premium billing and collection.
Employers Often Assume Too
Much
Employers often assume that their responsibilities
regarding a COBRA case end when the carrier begins the premium billing cycle;
they believe that the carrier will handle all other COBRA requirements from
that time forward. Nothing could be further from the
truth.
Unfortunately, carriers sometimes fail to clearly
describe the limited role they are actually performing, thereby leading many
employers to believe their work is done once COBRA is elected. Worse yet, some
employers assume they are no longer responsible for any COBRA administration
once they authorize the carrier to handle billing. In reality, all
administrative accountability remains with the employer/plan
administrator.
Employers are Out of the Information
Loop
Even when employers understand their
responsibilities for all other aspects of COBRA administration, they are
unwittingly placing themselves out of the information loop when premium
collection is handled by the carrier. If the COBRA beneficiary believes the
billing contact is the only party they need to communicate with, the employer
is placed out of communication the loop and does not receive information
critical to the administration of COBRA. In some instances when the carrier
handles billing, the employer may not even know when a beneficiary's COBRA
coverage terminates. Without having complete and accurate information regarding
the status of qualified beneficiaries, the employer cannot possibly be in
compliance with COBRA.
Managing Multiple Plans is Inherently
Dangerous
When more than one insurance carrier or HMO is
available to employees, the employer is still responsible for receiving some
payments from COBRA participants, unless all carriers agree to handle COBRA
premium collection. Coordinating premium collection from some carriers and not
others is a challenging administrative task that carries a very high risk of
error.
Billing Errors Made by a Carrier or TPA May
Be Your Responsibility
Anyone who has dealt with insurance carrier and HMO
billing departments knows that they are not COBRA experts. In the absence of a
written agreement that places responsibility for billing errors squarely on the
shoulders of the third party, you will be held responsible for the results of
such errors.
There's More to COBRA Billing than Meets the
Eye
There are many premium collection requirements
under COBRA that differ from the regular collection of premiums normally
handled by carriers. Unless you are certain the carrier has the capability of
handling all the nuances of COBRA premium payment scheduling and collection,
costly mistakes may result.
Outsourcing Administration
after COBRA is Elected
Some insurance carriers offer to take on the
responsibility for COBRA administration once a qualified beneficiary makes a
COBRA election. Although this option is less prone to error than the premium
collection only method described above, it still leaves much room for
disaster.
Delivery of COBRA Notices Prior to
Election
Most serious COBRA administration errors occur in
the pre-election phase of the process. For example, proper delivery of the
General Notice when plan participants first become covered under the plan is
considered the most critical task in COBRA
administration.
The second most important responsibility held by
the plan administrator is to properly notify beneficiaries of their COBRA
rights when a qualifying event occurs. These notices must be delivered in a
timely manner, addressed to the correct individuals, and include accurate
information as specified by the U. S. Department of Labor. If a mistake is made
with either of these notices, there is little chance that the carrier or TPA
will come to the rescue, because their involvement in the process does not
begin until after COBRA is elected.
Keeping Records of What Happens Prior to
COBRA Election
Accurate record keeping is critical to COBRA
compliance, and is the sole responsibility of the plan administrator,
regardless of how much work is outsourced to third parties. All too often,
employers believe that the carrier or TPA is handling - and is ultimately
responsible for - detailed recordkeeping. Such misconceptions leave them
defenseless when the IRS or a court demands supporting documentation.
Unfortunately, third parties that handle COBRA administration after COBRA is
elected simply cannot maintain records of what came
before.
Outsourcing Administration after a Qualifying
Event
Although the most complete of the three methods
commonly used for outsourcing COBRA administration to a carrier or TPA, this
method still presents risks and the illusion that COBRA responsibility has been
shifted to the other party. Regardless of the administrative skills of the best
insurance carrier or TPA, the plan administrator handling the day-to-day
operations of the health plan remains responsible for communicating critical
data and ensuring that the information is received and processed in a timely
manner. Unfortunately for employers, there is no escape from COBRA
responsibility.
Conclusion
Defining responsibility for each
COBRA task is critical, especially if you outsource some, but not all,
administrative tasks to a third party. Always:
- Investigate all
administration options carefully, including the option to maintain complete
control over the administrative process. Inexpensive software tools programmed
to include COBRA's rules are available to simplify and speed
self-administration. (See COBRA OnQue
Features)
- Take the time to define and
document the administrative tasks required in your situation, especially
when sharing such tasks with a third party.
- Remember that outsourcing is
not a magic bullet. Do not assume it is always in your best interest to
outsource COBRA administrative duties. Outsourcing is expensive, often
incomplete and always prone to communication problems.
- Document, Document,
Document. Always keep complete records of all COBRA related activities and
transactions, even when utilizing the services of a third party. When using
such services, stay informed and involved at all stages of administration and
catch errors early by reconciling your records with theirs on a regular
basis.
- Remember that you cannot pass
off all responsibility to a third party. The law clearly makes the plan
administrator fully responsible for COBRA administration, regardless of the
level of involvement by third parties.
Make quick work of your COBRA obligations, save
money and forget your compliance worries: COBRA OnQue
Demo |
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| Related COBRA Tips |
| Who Pays Damages When COBRA Is
Improperly Denied? |
| COBRA Billing: Is It
Required? |
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This information is provided by
OnQue Technologies, Inc. for educational purposes only and does not constitute
legal advice. If legal advice or other professional assistance is required, the
services of a competent professional should be sought.
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