Comments or suggestions?

about this or future e-newsletters.

COBRA: Keep your organization compliant and reduce costs

It's important to keep up with the complex requirements of COBRA administration. One small error can have costly consequences. That's why many companies choose to outsource this function. However, outsourcing doesn't just ease administrative burdens and compliance risk - it can also save your organization money.

Partnering with Ceridian for COBRA administration can both reduce your exposure to costly fines for noncompliance and reduce health care claims from COBRA continuants.

COBRA complexities
The Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, provides continuation of health insurance coverage for qualified employees and their eligible dependents who have lost coverage due to a qualifying event such as termination, resignation, reduction in work hours, divorce, death or other losses of eligibility. Under COBRA, an employee has the right to continue coverage under the former employer's group health plan for up to 18 months, providing the employee pays for the full cost of coverage plus a two percent administrative fee.

COBRA regulations are difficult to interpret. Keeping up with potential legislative changes, retaining detailed records, notifying eligible beneficiaries and collecting premium payments make COBRA administration complicated. Many companies unknowingly make mistakes, which can lead to costly fines, including:

• IRS excise taxes of $100 - $200 per notice per day, up to 10 percent of the cost of the health plan or $500,000 per year.
• Department of Labor fines of $110 per notice per day.
• HIPAA certificate penalties of $100 per certificate per day.

On top of these fines, an employer or plan administrator may be required to pay medical expenses and litigation costs if a case goes to court.

We've got a solution
Outsourcing COBRA administration can help organizations ease the burden and liability involved. Ceridian is the nation's largest COBRA administrator with more than 45,000 COBRA Continuation Services customers. We handle administration for about 7.2 million COBRA participants. Our services cover:

• Initial notification of COBRA rights and obligations.
• COBRA qualifying event notices.
• Responses to participant questions and issues.
• Monthly continuant billings, grace letters and collection of premiums.
• Retention of proof on all critical transactions.

Ceridian works directly with participants on all issues - reducing the burden for clients. If compliance comes into question, Ceridian helps handle the situation. We stay on top of COBRA regulations to help analyze laws and stay up to date on court cases that affect COBRA.

It's also cost effective
With the high costs for COBRA coverage, healthy people don't usually sign up for it. Many people only elect the coverage if they have existing medical conditions or expect to have significant medical expenses. On average, COBRA claim costs are 46 percent higher than active employee claim costs. The average health care costs per participant are $5,721; average costs per COBRA participant are significantly higher at $8,353 per year.

According to the Employee Health Benefit Research Institute, employers and their active employees generally bear the brunt of the higher health care costs attributable to COBRA users.

Ceridian can help your organization streamline the COBRA administration process to reduce health care costs and minimize the number of initial COBRA continuants. When compared to the national average, Ceridian has reduced continuant claims by as much as 25 percent and lowered the number of continuants by more than 20 percent for many of our customers by closely tracking employee eligibility to determine which individuals qualify for continued coverage. Many organizations don't realize that they are covering individuals who do not qualify due to:

• Failure to pay.
• Going beyond the assigned COBRA period of 18, 29 or 36 months.
• No COBRA qualifying event and therefore not eligible for COBRA coverage.

Ceridian COBRA Continuation Services helps reduce the length of time on COBRA in some cases by more than 20 percent through adherence to COBRA regulations and consistent adjudication. As a result of eliminating coverage for individuals who don't qualify, the average time on COBRA is 7.5 months for a participant of a Ceridian client compared with the 2004 national average of 9.6 months.

Find out your potential savings
Check out Ceridian's COBRA Claims Savings Calculator to calculate your organization's potential savings with our comprehensive COBRA compliance services:

COBRA Claims Savings Calculator

Contact your Ceridian representative for more information about Ceridian COBRA Continuation Services.

Sources
1) Spencer Benefits Reports 2004 COBRA Survey.

2) Employee Benefit Research Institute, Washington, D.C., 2001