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A Service of OnQue Technologies, Inc. |
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COBRA Billing: Is It
Required? |
January 22, 2003
Santa Rosa, CA |
Does COBRA require administrators to send
billing statements?
No. Some
employers choose to take on the extra administrative burden of billing COBRA
recipients for premiums by sending monthly statements or by providing payment
coupons at the beginning of the coverage period. What many employers don't know
is that COBRA law does not require plans to provide qualified beneficiaries
with billing statements of any kind for the payment of COBRA premiums.
How are beneficiaries informed of the amount due for COBRA
coverage?
The COBRA election notice
provides written notification of the COBRA premium amount (usually the amount
due per month) and the day of the month on which it is due. According to the
Department of Labor (DOL), it is the beneficiary's obligation to remember to
pay the premiums on time. Through its Pension and Welfare Benefits
Administration agency, the DOL informs COBRA recipients that "You should also
be aware that it is your responsibility to pay for COBRA coverage even if you
do not receive a monthly statement."
Must payments be made
monthly?
No. But COBRA regulations do
guarantee to qualified beneficiaries the right to pay premiums on a monthly
basis. Plans may allow beneficiaries to schedule payments over longer
intervals, such as quarterly, as long as election of such alternative payment
intervals is voluntary - beneficiaries must be allowed to make monthly payments
if they so choose.
What happens if the amount of the premium
changes?
With a few exceptions, the
amount of COBRA premiums must be set for a 12-month determination period. But
if a change in the amount of the COBRA premium does occur, as when a
beneficiary becomes disabled, plans are under a legal obligation to inform
beneficiaries of that change in writing. This obligation is in force even if
the plan chooses not to send billing statements.
Are employers required to
notify beneficiaries that coverage is about to terminate due to nonpayment of
premiums?
No. The law does not
require notice to qualified beneficiaries that coverage will end because a
premium payment was not received. Beneficiaries must be properly notified in
the Election Notice of the amount of the premium, the date on which payments
are due, the duration of the grace period in which to make timely payments, and
the fact that failure to pay premiums within the grace period will result in
termination of coverage. The initial premium payment must be made within 45
days of the date on which coverage was elected. For all future premium
payments, the law requires a minimum 30-day grace period before COBRA coverage
may be terminated without further notice. (A plan may choose a longer grace
period, but not a shorter one.)
What is an "insignificant"
shortfall in a COBRA premium payment?
Although COBRA coverage may be terminated for failure to pay a
premium, it may not be terminated automatically when an insignificant shortfall
in the amount of the premium payment is received. Final IRS regulations, issued
in 2001, specify that a shortfall of no more than $50 or 10 percent of the
amount of the premium, whichever is less, will be considered "insignificant."
When an insignificant shortfall in the amount of the premium payment is
received, a plan may choose to treat that payment as payment in full, or notify
the beneficiary that the payment was short and provide a reasonable period of
time in which to submit the additional amount. The IRS has stated that an
additional 30 days is a reasonable time period in which to require that payment
of the shortfall be made. |
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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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