What ARRA's COBRA changes can tell you about the health of your business
From the May 2009 issue of Ceridian Connection.
The COBRA premium subsidy law under the American Reinvestment and Recovery Act of 2009 (ARRA) brought many challenges to employers. But it also presented them with an invaluable opportunity to assess the long-term health of their businesses.
Enacted February 17, the legislation required immediate action from businesses by introducing temporary changes to one of the most complex, compliance-driven, time-consuming employer mandates to date: COBRA.
In exchange for a tax credit, employers are now required to provide a 65 percent COBRA premium subsidy to qualified individuals who were laid off and lost their health benefits on or after Sept.1, 2008, and before Dec.31, 2009.
That left many company executives asking, "Do we have the resources, the internal capabilities and the flexibility to manage these new COBRA changes?"
Even a business that outsourced its COBRA administration feels the need to examine the strength of its vendor partnership: "Does our current vendor have the ability to provide the insight we need into the new COBRA changes, to effectively communicate with us regarding new tasks and requirements, and to administer the premium subsidy on our behalf in a timely and compliant manner?"
By now, you should be able to answer those questions and get a pretty good idea whether you -- or your vendor -- are up to the COBRA challenge.
The more urgent question, however, is whether your business is ready to meet the even greater challenges ahead.
Changes Ahead
The COBRA Subsidy Law under ARRA stands as a perfect example of the challenges today's businesses face, from dealing with regulatory requirements and greater demands for compliance and documentation to doing more with less in one of the harshest economic climates in recent history.
President Barack Obama has set a goal of enacting sweeping health care reform in 2009. There is little doubt that this year, U.S. health care policy will experience more change than at any time in the last half-century.
The COBRA subsidy that became law only four short months ago is, in many ways, just the beginning of years of change. Landmark health legislation is expected to have major implications for employers in a number of key areas including health benefits, FMLA and compliance obligations.
Recently Ceridian hosted an educational Web forum to alert companies to the coming challenges of health care reform. The replay of the forum, available here, addresses how Congress and the White House will likely decide on several critical health care policy issues in the coming year. These include:
No matter how you look at it, economic and legislative forces are redefining the way America works and companies do business - and, in some cases, how they stay in business.
Lessons Learned
Like chief executives, HR and benefits professionals need to be keenly aware of these coming changes.
More important, they need a plan. They need to take a closer look at the lessons learned from the recent implementation of ARRA's COBRA subsidy. They need to assess their companies' strengths and weaknesses -- and their vendor partners' capabilities -- when it comes to handling large-scale legislative changes. And they need to take immediate action to prepare for the new "business as usual."
As we did all throughout the implementation of ARRA, Ceridian has been regularly communicating with its clients about the broad changes ahead. We've identified the most important lessons to be learned from ARRA and help you prepare for the future:
Be certain about compliance
If COBRA has ever taught employers anything, it's the importance of strict compliance. By following the letter of the law, businesses can mitigate risk of costly fines and penalties while helping their former employees who qualify for benefits continuation. Under ARRA, the COBRA penalties for noncompliance did not lessen. Regardless of what many considered unrealistic timelines by the U.S. Department of Labor, the penalties did not change at all. If businesses could not meet the federal deadline to send out general ARRA COBRA notices by April 18, 2009, for example, they were at risk for up to $110 a day for failure to provide timely information.
If you administer COBRA in-house, take a good look at your compliance and legal departments. Make sure they have the experience to handle similar challenges in the future.
If you outsource COBRA, take a closer look at your vendor:
Successful employers stay alert to changes, marshal resources and knowledge to implement those changes, and make compliance a top priority, always.
Seeking savings from benefits now- for the future
Think about it: Much of the stress experienced by employer and employee alike today can be attributed to health care -- more specifically, the high cost of health care. The recent COBRA changes under ARRA were enacted to help laid-off workers who otherwise couldn't pay for their health care continuation coverage. By the same token, a recent survey indicated that COBRA costs in 2008 were almost 170% of active employee costs, noticeably higher than the 150% average cited in previous years. ARRA made it clear that health care costs present a major challenge to everyone.
As a benefits professional, you can view your company's employee benefits package as a tool to recover costs associated with one of your company's fastest-growing expenses -- your group health plan. Pretax benefits such as Flexible Spending Accounts, Health Spending Accounts and Health Reimbursement Arrangements not only can help employees save money but, if administered properly, can help employers save enough to actually cover the cost of outsourcing those programs.
As an added benefit, these programs also help employees become more proactive in making wiser health decisions and controlling their own health costs, which is sure to be an important component to health care legislation to come.
Stay focused on productivity
Like all businesses, yours is probably struggling to do more with less. When mandates such as ARRA require new actions -- coordination and integration between your benefits, payroll and tax filing departments, for instance, or changes to internal infrastructure, or more time spent seeking guidance and information -- it costs you more than just time and money. It costs your employees momentum. At some point, you may want to ask yourself whether you really want to train employees to acquire new skills to handle new legislation, or would outsourcing be smarter, freeing your staff to focus on your business. Now is the time to consider what specific advantages benefits outsourcing can bring to your table.
And as long as you're focusing on employee productivity, don't forget employee assistance and health and wellness programs. In times like these, such programs help employees stay productive in challenging workplaces and a troubled economy.
Trust in experience
Approximately three-quarters of all businesses outsource their COBRA administration. ARRA showed them exactly how their third-party benefits administrator might perform in the near future as similar changes come from Capitol Hill. As a business, you should be able to trust that your vendor can adapt quickly to these changes. And trust, in business, is built on one thing: experience.
Ceridian can best illustrate how this works in the marketplace. As the nation's largest COBRA administrator and a leader in payroll administration and tax filling, we are ideally positioned to handle the changes to COBRA introduced by ARRA. We have unrivaled experience offering COBRA at subsidized rates. We routinely serve as consultants to congressional leaders seeking information on health care continuation coverage. And we have an enviable history of compliance.
But how quickly was Ceridian able to respond to ARRA's changes?
Over the course of a few months, Ceridian worked diligently to meet all the federal government's ARRA compliance regulations on behalf of its tens of thousands of COBRA partners. We doubled our number of Call Center representatives, increased training, expanded our telecom server infrastructure and call capacity, added new features to our Interactive Voice Response system, and provided ongoing communications with clients and their former employers regarding our process changes and ARRA requirements. Ceridian was able to do this successfully. As a leading COBRA administrator since COBRA was passed in 1986, Ceridian's staff had seen countless regulation changes over the decades. They had experience.
And in business, experience bodes well for your future.
The COBRA premium subsidy law under the American Reinvestment and Recovery Act of 2009 (ARRA) brought many challenges to employers. But it also presented them with an invaluable opportunity to assess the long-term health of their businesses.
Enacted February 17, the legislation required immediate action from businesses by introducing temporary changes to one of the most complex, compliance-driven, time-consuming employer mandates to date: COBRA.
In exchange for a tax credit, employers are now required to provide a 65 percent COBRA premium subsidy to qualified individuals who were laid off and lost their health benefits on or after Sept.1, 2008, and before Dec.31, 2009.
That left many company executives asking, "Do we have the resources, the internal capabilities and the flexibility to manage these new COBRA changes?"
Even a business that outsourced its COBRA administration feels the need to examine the strength of its vendor partnership: "Does our current vendor have the ability to provide the insight we need into the new COBRA changes, to effectively communicate with us regarding new tasks and requirements, and to administer the premium subsidy on our behalf in a timely and compliant manner?"
By now, you should be able to answer those questions and get a pretty good idea whether you -- or your vendor -- are up to the COBRA challenge.
The more urgent question, however, is whether your business is ready to meet the even greater challenges ahead.
Changes Ahead
The COBRA Subsidy Law under ARRA stands as a perfect example of the challenges today's businesses face, from dealing with regulatory requirements and greater demands for compliance and documentation to doing more with less in one of the harshest economic climates in recent history.
President Barack Obama has set a goal of enacting sweeping health care reform in 2009. There is little doubt that this year, U.S. health care policy will experience more change than at any time in the last half-century.
The COBRA subsidy that became law only four short months ago is, in many ways, just the beginning of years of change. Landmark health legislation is expected to have major implications for employers in a number of key areas including health benefits, FMLA and compliance obligations.
Recently Ceridian hosted an educational Web forum to alert companies to the coming challenges of health care reform. The replay of the forum, available here, addresses how Congress and the White House will likely decide on several critical health care policy issues in the coming year. These include:
- Will a mandate be imposed on all employers to provide coverage to their employees?
- Will the current tax-free treatment of employer-provided coverage be changed?
- What will happen to consumer-directed health plans, such as HSAs?
No matter how you look at it, economic and legislative forces are redefining the way America works and companies do business - and, in some cases, how they stay in business.
Lessons Learned
Like chief executives, HR and benefits professionals need to be keenly aware of these coming changes.
More important, they need a plan. They need to take a closer look at the lessons learned from the recent implementation of ARRA's COBRA subsidy. They need to assess their companies' strengths and weaknesses -- and their vendor partners' capabilities -- when it comes to handling large-scale legislative changes. And they need to take immediate action to prepare for the new "business as usual."
As we did all throughout the implementation of ARRA, Ceridian has been regularly communicating with its clients about the broad changes ahead. We've identified the most important lessons to be learned from ARRA and help you prepare for the future:
Be certain about compliance
If COBRA has ever taught employers anything, it's the importance of strict compliance. By following the letter of the law, businesses can mitigate risk of costly fines and penalties while helping their former employees who qualify for benefits continuation. Under ARRA, the COBRA penalties for noncompliance did not lessen. Regardless of what many considered unrealistic timelines by the U.S. Department of Labor, the penalties did not change at all. If businesses could not meet the federal deadline to send out general ARRA COBRA notices by April 18, 2009, for example, they were at risk for up to $110 a day for failure to provide timely information.
If you administer COBRA in-house, take a good look at your compliance and legal departments. Make sure they have the experience to handle similar challenges in the future.
If you outsource COBRA, take a closer look at your vendor:
- Have they been in business long enough to have successfully executed large-scale changes?
- Can they represent you on Capitol Hill when COBRA changes are being considered?
- Did they provide timely updates on regulations and federal guidance?
- Do they have a history of airtight compliance?
Successful employers stay alert to changes, marshal resources and knowledge to implement those changes, and make compliance a top priority, always.
Seeking savings from benefits now- for the future
Think about it: Much of the stress experienced by employer and employee alike today can be attributed to health care -- more specifically, the high cost of health care. The recent COBRA changes under ARRA were enacted to help laid-off workers who otherwise couldn't pay for their health care continuation coverage. By the same token, a recent survey indicated that COBRA costs in 2008 were almost 170% of active employee costs, noticeably higher than the 150% average cited in previous years. ARRA made it clear that health care costs present a major challenge to everyone.
As a benefits professional, you can view your company's employee benefits package as a tool to recover costs associated with one of your company's fastest-growing expenses -- your group health plan. Pretax benefits such as Flexible Spending Accounts, Health Spending Accounts and Health Reimbursement Arrangements not only can help employees save money but, if administered properly, can help employers save enough to actually cover the cost of outsourcing those programs.
As an added benefit, these programs also help employees become more proactive in making wiser health decisions and controlling their own health costs, which is sure to be an important component to health care legislation to come.
Stay focused on productivity
Like all businesses, yours is probably struggling to do more with less. When mandates such as ARRA require new actions -- coordination and integration between your benefits, payroll and tax filing departments, for instance, or changes to internal infrastructure, or more time spent seeking guidance and information -- it costs you more than just time and money. It costs your employees momentum. At some point, you may want to ask yourself whether you really want to train employees to acquire new skills to handle new legislation, or would outsourcing be smarter, freeing your staff to focus on your business. Now is the time to consider what specific advantages benefits outsourcing can bring to your table.
And as long as you're focusing on employee productivity, don't forget employee assistance and health and wellness programs. In times like these, such programs help employees stay productive in challenging workplaces and a troubled economy.
Trust in experience
Approximately three-quarters of all businesses outsource their COBRA administration. ARRA showed them exactly how their third-party benefits administrator might perform in the near future as similar changes come from Capitol Hill. As a business, you should be able to trust that your vendor can adapt quickly to these changes. And trust, in business, is built on one thing: experience.
Ceridian can best illustrate how this works in the marketplace. As the nation's largest COBRA administrator and a leader in payroll administration and tax filling, we are ideally positioned to handle the changes to COBRA introduced by ARRA. We have unrivaled experience offering COBRA at subsidized rates. We routinely serve as consultants to congressional leaders seeking information on health care continuation coverage. And we have an enviable history of compliance.
But how quickly was Ceridian able to respond to ARRA's changes?
Over the course of a few months, Ceridian worked diligently to meet all the federal government's ARRA compliance regulations on behalf of its tens of thousands of COBRA partners. We doubled our number of Call Center representatives, increased training, expanded our telecom server infrastructure and call capacity, added new features to our Interactive Voice Response system, and provided ongoing communications with clients and their former employers regarding our process changes and ARRA requirements. Ceridian was able to do this successfully. As a leading COBRA administrator since COBRA was passed in 1986, Ceridian's staff had seen countless regulation changes over the decades. They had experience.
And in business, experience bodes well for your future.
