Ceridian provides antidote for COBRA's regulatory bite

When Joe retires from ABC Company this year, he will drop his existing medical coverage and go on Medicare. His younger wife, Jane, however, is not yet eligible for Medicare and will be left without group coverage.

When Alice decides to switch from working full time to part time, she is no longer eligible for benefits. She and her covered dependents will lose their coverage.

Both Mr. and Mrs. Jones receive health care insurance through his employer. But when they divorce, Mrs. Jones is no longer covered.

Three different scenarios and three potential reasons for why people might rely on COBRA. The Consolidated Omnibus Budget Reconciliation Act (COBRA) provides continuation of insurance coverage for qualified employees and their eligible dependents who have lost coverage due to a qualifying event. While many people think COBRA pertains only to employees who are terminated or laid off from their company, administrators must remember that it also applies to many other situations for employees and their eligible dependents.

Understanding the complex components of COBRA can be a tough assignment for the human resources professional who has only a basic working knowledge of the regulations. One seemingly minor oversight in COBRA administration can cost companies thousands of dollars, not to mention the employee's loss of trust in the employer. To ensure compliance, many companies turn to outside administrators who specialize in COBRA.

COBRA can be complex...
To understand just how complex COBRA can be, consider what is involved in the example where Joe retires from ABC Company. As more baby boomers retire and become eligible for Medicare, many of their eligible dependents will opt for COBRA and keep it for up to 36 months. During this time, companies must keep records of where the participants live to ensure appropriate notification materials and even benefit open enrollment information is sent to the correct address in a timely manner. That's right -- participants need open enrollment materials because they are continuing coverage through the employer. Employers are obligated to treat COBRA participants with the same benefit rights as active employees.

...and costly
The divorce example has another potential problem. When employees and their eligible dependents enroll in coverage, initial notification of COBRA rights must be provided to not only the employee, but to their covered dependents as well.

If the couple divorce and Mrs. Jones is not notified of her coverage continuation rights under COBRA, the employer can be sued and forced to pay fines, legal fees and even medical costs that were incurred while she thought she was covered. The following real-life example shows what one company paid for failure to send the proper notification of COBRA rights:

Common COBRA mistakes
Common mistakes that increase risk for employers:

• No up-to-date COBRA manual.
• Not providing or having an Initial Notice of COBRA Rights.
• Not providing the Qualifying Event Notice.
• Not maintaining proof of compliance.
• Making a decision that "feels right."
• Making exceptions to the plan documents and then not applying exceptions consistently under similar circumstances.
• Not offering COBRA for other coverage such as dental, vision, EAP (Employee Assistance Program) and FSA (Flexible Spending Account).
• Overlooking the COBRA continuants at open enrollment.
• Not understanding COBRA in regard to FMLA (Family and Medical Leave Act).

(Source: 2004 Spencer Benefits Reports)

Ceridian can help
To avoid non-compliance with the many regulations involved in COBRA administration, more employers are calling in the experts for help. And the expert they often call is Ceridian, one of the largest COBRA administrators in the country.

"We have the policies and procedures in place to mitigate the risks for employers," said Jon Attwooll, product manager for Benefits Continuation at Ceridian. "We do more than the law requires when it comes to things such as sending monthly invoices. Yet our compliant processes follow the full letter of the law and have proven to reduce COBRA populations and eventually save our clients money."

The following example explains how Ceridian can save money for an employer. If a retiree fails to elect COBRA coverage within the 60-day timeframe, his employer's human resources administrator might let the retiree elect coverage after the deadline. If the retiree in this situation tried to enroll after the deadline, Ceridian would deny coverage, saving the employer claims costs the participant may incur over the COBRA continuation period. These claims costs are factored in when insurers determine the health plan premiums they offer to the employer and an inordinately large COBRA population may drive up these premiums.

Ceridian maintains strict adherence to COBRA regulations with services including:

• COBRA notifications to all eligible participants sent in the most compliant manner.
• Retention of proof on all critical notifications and transactions.
• Experienced online and phone support for both employers and participants.

"We also stay current on COBRA regulations by employing an in-house compliance department to analyze and interpret laws and stay up-to-date on case law that affects COBRA," Attwooll said. "As changes occur, Ceridian updates our system, as well as our clients, to ensure they stay in compliance."

For more information about Ceridian's COBRA Benefits and HIPAA Compliance services, contact your Ceridian representative.