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• Cobra Administrators are looking to get you off of COBRA, not keep you on COBRA, as you are costing the employeer money.

 
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows families to continue with the same health insurance (continuation coverage), they received under their company's group plan, when they lose or change jobs. There are multiple government agencies administering COBRA, including the Department of Labor and the Internal Revenue Service. They have established complex compliance rules and regulations for administering COBRA.

Larger companies, with more than twenty employees, are required to establish COBRA compliance. These firms tend to have cheaper group health plans, due to economies of scale discounts. COBRA coverage allows families to continue temporarily (typically for eighteen months) with their previous company group plan when a "qualifying event" occurs. This "qualifying event" can include any of the following, which would normally result in lost health care coverage for the beneficiary: reduced hours, changing jobs, being fired, divorce or death.

Rules, regulations and laws governing COBRA are very strict. Non-compliance can lead to enormous fines, penalties and lawsuits. Employers must notify COBRA administrators within thirty days of a qualifying event. Within fourteen days, the COBRA administrator must send the qualifying beneficiary an event notice. Then, the qualifying beneficiary has sixty days to decide whether to accept COBRA coverage. If the beneficiary accepts COBRA coverage then the first premium must be paid within forty-five days. Once beneficiaries choose COBRA coverage, they may be required to pay up to 102% of the health care premium.

Keeping abreast of all of these timelines and procedures can be a human resources nightmare. It can become quite tedious to send out COBRA announcements, notices, alerts and updates for former employees. Contact databases with names, addresses and dates must also be managed.

Many companies outsource COBRA administration because of the complexity of compliance, cost of record-keeping and as a hedge against liability. Businesses don't make any money from complying with COBRA; it is an unfunded mandate. Companies can better focus their human resources on current employees, when COBRA is outsourced.

Third-party COBRA brokers and agents have many key advantages over in-house administration. COBRA brokers focus their energy on becoming true "experts" on COBRA rules and regulations, through newsletters, publications and classes. These COBRA administrators can better understand the government regulatory labyrinth.

Outsourcing firms are more efficient in administering COBRA - they can automate notices and invest money in better software and database systems for tracking all of the information necessary for compliance. They can streamline processes for increased efficiency.

COBRA agents have financial incentives to move beneficiaries off of the company plan as soon as possible. Good COBRA administrators know the rules and can prevent those who are not entitled to benefits from receiving them. These administrators hope to reduce record-keeping and health claim costs (the average COBRA health claim is higher then the employee health claim) by removing people from COBRA.

Third-party outsourcing firms have more access to alternative programs and tools to force people off of COBRA. The term, "end of client" management, refers to attempts to get beneficiaries moved to different systems. COBRA is only meant to be temporary. Most beneficiaries will need to leave the program after eighteen months (certain qualifying events or a second qualifying event may extend coverage for thirty-six months).

COBRA administrators don't have any reason to make sure that beneficiaries receive good customer service. Administrator red tape, inaction and delays can make it so these unwanted burdens miss their due dates - causing loss of coverage, once the allotted time has passed. Some have been amazed to find they didn't have prescription drug, dental or medical coverage after paying their premiums.

Administrators are not medical experts, some aren't even COBRA-certified. Some COBRA administrators give beneficiaries the run-around so they get frustrated. Few people have the resources to bring a lawsuit against these COBRA administrators. Some have lost their COBRA due to outsourced administrator incompetence.

There are two primary classes of people involved who are considering COBRA - the healthy and those with pre-existing conditions.

Those in good health will probably have better health insurance options, choosing a family plan if it has a lower premium or better coverage.

Typically, employers paid about 75% of the health care premium for active employees. Once these beneficiaries lose their jobs, they are surprised with having to pay 102% of the bill for continued coverage. Statistics show that only about 10% of beneficiaries continue COBRA coverage.

Beneficiaries with pre-existing conditions are most likely to stay on COBRA. They should use COBRA as a temporary stop-gap before finding another job or health care plan.

Medicare is a possibility for the poor. And there are rumors of more health care options available under the Government Stimulus Package. Also, the Federal Government can help subsidize COBRA coverage. Rules are in place to cover people when their COBRA coverage lapses. More than 43 states have extended COBRA benefits rules.

COBRA was created to prevent people from losing health care coverage. Those who are healthy can find alternatives more easily. Those with pre-existing conditions must remember that the COBRA administrator does not have their best interests in mind.

George L. Fox, LUTCF, serves as Founder of Cobra Help Center and Vice President of Planning Financial Futures, Inc. He is a lifetime resident of Long Island and lives in Huntington with his wife, Vicki, and their three children. George is a graduate of the State University of New York, NYIT and the College for Financial Planning.

Source: http://www.cobrahelpcenter.com

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