Benefits Administration

This COBRA Won’t Bite: Everything You Should Know About COBRA Medical Coverage

August 10, 2019 | Curry Bradley, Chief Marketing Officer, Principal

Health care coverage under COBRA, properly known as the Consolidated Omnibus Budget Reconciliation Act of 1985, has been at play for more than 30 years, but confusion continues to surround it. The law gives qualified employees who sever ties with their job the option to continue coverage through the employer, at their own expense. It’s a chance for qualified beneficiaries to continue coverage that would normally be lost.

At Winston, we fully believe that ConnectYourCare’s mission to make coverage as easy as possible for all parties makes a difference. Our partnership with ConnectYourCare puts the resources you need to navigate COBRA directly in your hands.

Here’s everything you — and your employees — need to know about COBRA.

How Does It Work, and Who Does It Cover?

COBRA care differs very little from the plan your employees are accustomed to from your provider, although the price may give your employees pause. That’s because the price they’re looking at under COBRA is typically 102% of the total cost of coverage. Employees are used to having coverage partially paid for by their employer, so the true price can seem daunting. As an employer continuing to cover an eligible former employee, you may charge a 2% administration fee.

The benefits of the coverage are the same, just at full price. For example, many people don’t realize that dependents covered under their original plan are still eligible for coverage under COBRA. Furthermore, dependents who are aging out when they turn 26 will be given the option to continue coverage.

Employees have 60 days from the point that they lose coverage or are notified of eligibility in the plan to sign up for COBRA care. The coverage becomes active after receipt of the first payment.

How Much Flexibility Does COBRA Offer?

One of the advantages of COBRA care is its flexibility based on the insured’s needs. A former employee can keep COBRA coverage for as long as they need it, and these determinations can be made on a month-to-month basis.

Also, COBRA care can function as a bridge between leaving one job and the start of benefits coverage at a new one. A waiting period before employees are eligible for benefits at a new job is common practice, sometimes up to three months. COBRA coverage can be maintained during that time to bridge the care gap.

What Are Some Common Pain Points, and How Can They Be Overcome?

Compliance, while not particularly complex, can still be a headache. The fines and penalties for noncompliance are severe. You must notify candidates of their eligibility and failure to do so can result in fines of up $100 a day per individual. Additionally, if further issues arise and they aren’t corrected, the employer can be charged another $125 a day in excise per individual.

The most effective way to avoid fines and maintain compliance comes down to communication between you and your employees. But don’t worry — ConnectYourCare helps to maintain that communication and makes offerings to employees crystal clear. ConnectYourCare is available to answer any questions and to make managing COBRA coverage as easy and pain-free for you and your employees as possible.


Disclaimer:  This content is strictly informational and should not be used as specific advice on insurance products, legal, accounting, and/or tax related matters. Insureds should always contact the appropriate licensed professional for their insurance, legal, accounting, or tax needs.

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