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5 Common COBRA Mistakes -- and How to Prevent Them


Most employers have to deal with COBRA at one time or another, but these are common errors.

1. Not realizing the group health plan is subject to COBRA.

Under COBRA, if you have at least 20 employees and a group health plan, you must give qualified beneficiaries who lose coverage due to a qualifying event — such as termination of employment — the option to continue their coverage. Both full-time and part-time employees must be included when calculating the 20-employee threshold.

2. Thinking COBRA applies only to major medical coverage.

If a benefit qualifies as a group health plan, it's likely subject to COBRA. To qualify as a group health plan, the benefit must facilitate medical care — which extends not just to major medical coverage but also to dental and vision coverage, flexible spending accounts, and some health reimbursement arrangements and employee assistance programs. In other words, think beyond traditional medical plans.

3. Not recognizing a qualifying event, and failing to offer COBRA to eligible individuals.

You must be able to spot COBRA-qualifying events when they occur. In addition, you must promptly offer qualified beneficiaries continuing coverage if applicable.

Qualifying events for employees include voluntary or involuntary termination (except for termination caused by gross misconduct) and reduction in work hours.

Qualifying events for spouses include voluntary or involuntary termination of the covered employee (except for termination caused by gross misconduct), reduction in the covered employee's work hours, death of the covered employee, divorce of the covered employee and Medicare qualification of the covered employee.

Dependent children have the same qualifying events as spouses plus one addition: loss of dependent child status under the group health plan rules.

4. Failing to consider state COBRA laws.

Some states have "mini-COBRA" laws that require even employers with fewer than 20 employees to provide continuing coverage. Also, some states have eligibility requirements and different coverage period limits that differ from those under federal laws. Be sure to check on whether your state has its own COBRA laws.

5. Not distributing required notices to qualified beneficiaries, or providing incorrect or inadequate information in the notices.

Group health plans must provide employees and other qualified beneficiaries with notices informing them of their right to COBRA. These notices include:

  1. General/initial notice, which describes the employee's right to COBRA.
  2. Election notice, which explains how to make a COBRA election.

In addition, there's the notice of unavailability, which explains why a participant or beneficiary is not entitled to continued coverage under COBRA, and the termination of coverage notice, which is sent when a participant's continuing coverage ends early.

The information that must be stated in each notice is highly specific. Further, most notices must be delivered within a specific time frame.

One way to avoid COBRA notice errors is to use the Department of Labor's Model General Notice and Model Election Notice, which are available on the agency's website. Also, when in doubt about COBRA, consult with an employment law attorney or an employee benefits expert.


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