National Employee Appreciation Day is this Friday. In honor of the event, you may want let your employees know that you appreciate them this week. But, why stop there when you can express employee appreciation all year long?
Some may feel that every day is employee appreciation day. (Or, as Don Draper once said on Mad Men: “That’s what the money’s for!”) Chances are, however, that your employees may feel differently. And, career site Glassdoor noted 80% of employees work harder when a boss “shows appreciation for their work.”
With appreciation and working harder in mind, here are 12 simple ideas to keep your employees inspired throughout the year:
- Cards: Even in an age of e-mails, texts and PowerPoints, there’s something nice about a handwritten card. Think of it as a way to practice your penmanship while letting employees know that you think they’ve done a great job for the company.
- Catered Lunch: A catered lunch from a favorite eatery is always a popular choice. For extra fun, add make-your-own sundaes or gourmet cupcakes for dessert.
- Tickets: Depending on your state, company culture and local laws, lottery tickets might be an ideal gift for some employees. If gambling isn’t your (or your employees’) style, then movie tickets would be just as welcome.
- Gift Cards: Many employees would love to drink a cup of coffee (or two) on the company’s dime. You can also buy gift cards in bulk at local restaurants or high-end grocery stores.
- Company-Wide Car Wash: Hire a car washing company or a group of local high school kids to come to parking lot and wash and vacuum employees’ cars.
- Massage Therapy: You can arrange a mass massage therapy session by hiring a provider to prove onsite massages throughout the day.
- Movie Day: Treat your staff to a matinee at the local cinema. Be sure to pick something in the PG or PG-13 realm to not offend more sensitive staff members.
- Financial Empowerment: Offer a financial education program such as those available through Dave Ramsey to help your employees overcome financial stress and achieve better money management.
- Musical Performance: Hire a barbershop quartet, local marching band or other musical ensemble to perform for your employees.
- Career Aspirations: Ask each employee to write down their career aspirations, and then bring them up during your annual performance reviews. This demonstrates your interest in their inner lives, and it identifies people who really care about the company.
- Coffee Cart: Hire a barista to set up a coffee cart onsite and serve free lattes, mochas and Italian sodas all day.
- Time Off: Consider giving your employees an extra day or half-day off (it doesn’t have to coincide with Employee Appreciation Day).
Here’s wishing you a fabulous day with your employees this Friday. For more HR best practices, Affordable Care Act and COBRA administration information and advice, subscribe to our COBRA blog in the top right corner of this screen.
COBRA CONUNDRUMS reprinted from the January, 2014 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.
On October 31, the IRS announced a loosening of the longstanding flexible spending account (FSA) use-it-or-lose-it rule. Since flexible spending accounts fall under COBRA, the next obvious question is … how will this change impact COBRA administration? As of this writing, there is no official guidance but we’ll attempt to unravel the “what ifs” below.
The old FSA rule
Participating employees had to use up all of their FSA funds on eligible plan expenses by the end of the year or the funds would be forfeited. Plan sponsors had the option of allowing up to a two and a half month grace period, which allowed employees a little more time to exhaust their FSA accounts.
The new FSA rule
Plan sponsors can now choose from two options: They can either keep their grace period with the use-it-or-lose-it rule intact, or they can eliminate the grace period and allow employees to roll over up to $500 of unused funds from the previous plan year.
COBRA implications under the old rule
- COBRA-qualified employers (20+ employees) who offered a medical flexible spending account were required to offer COBRA only to those with underspent FSA accounts. They did not have to offer COBRA to those who had already used up FSA funds.
- If Limited COBRA applied, the FSA portion of COBRA could be terminated at the end of the plan year in which the COBRA-qualification occurred.
- Terminated employees were allowed to make after-tax contributions to their accounts once the employer’s paychecks stopped.
- Employers were allowed to charge COBRA participants a small administrative fee.
- Most employees who terminated in the middle of a plan year, and had not yet used up their FSA funds, elected to continue the FSA under COBRA. They would lose their funds upon termination if they did not elect COBRA.
How do you know if your plan qualifies for Limited COBRA?
Generally, if the Medical FSA is funded entirely by Employee Salary Reduction and the eligibility to participate in the FSA matches or exceeds the eligibility rules for the Group Health Insurance, then the plan can offer limited COBRA to its Medical FSA participants. If the plan doesn't meet the requirements for Limited COBRA, full COBRA must be offered and administered just like any other qualifying group health plan. Because the COBRA rules are so complex, remember to check with your legal counsel.
The “what ifs” of new rule COBRA application
- If the plan is eligible only for Limited COBRA (through end of current year and not eligible to renew the benefit for the subsequent plan year), the rollover option will likely have no impact. Example: Employee is a participant in calendar year 2013 FSA plan. Employee terminates on 6/30/13. Health FSA qualifies for Limited COBRA obligation (HIPAA excepted benefit). Employee’s contributions exceed reimbursements for 1/1/13 – 6/30/13, so Employee is offered Limited COBRA and elects it. Her FSA participation will terminate 12/31/13 (even if there is an applicable claims run out period), and she would not benefit from the rollover option since she would not be eligible to participate as of 1/1/14.
- If the plan is not eligible for Limited COBRA, in the scenario above, the rollover would most likely apply. In that case, the participant could elect to continue FSA plan participation beyond 12/31/13 until COBRA eligibility expires. There is no current guidance on point, but I think that our assumption should be that for general (non-Limited) COBRA scenarios, the COBRA FSA participants will be treated like regular non-COBRA FSA participants and gain the benefit of the rollover.
- If an employee gets terminated after behaving obnoxiously at the company Christmas party and is therefore terminated on Friday, Dec. 27 with $500 left in his FSA and the plan year ends Dec. 31, the employer requirements still come down to whether the plan is eligible for Limited COBRA. The default for a Limited COBRA scenario is that the employee would be eligible only for the current year and would not be eligible to participate for 2014. If the employee had previously made an election for 2014, the employer could potentially discard it and not allow him to participate since the termination was prior to 1/1/14.
New rule recap
- The rollover provision is not a one-time event for 2014, and it may be implemented for the current plan year or for a future plan year.
- The rollover allowance does not affect the maximum amount of employee contributions (currently $2,500).
- The rollover provision is an alternative to the current 2.5 month grace period option for the Health FSA. Plans that are amended to incorporate the rollover will not be able to have the grace period. $500 is the maximum rollover amount. A plan may elect to use a lower rollover maximum (or no rollover at all), but the rollover amount may not exceed $500.
Every new rule triggers new questions and new procedures. Hopefully, you now have a bit more clarity regarding this FSA COBRA Conundrum.
Here’s another insightful Affordable Care Act update from our friend Jason M. Cogdill, Corporate Counsel & Benefits Attorney at ProBenefits, Inc.
On January 13, 2014, the Department of Health and Human Services released a report on the Health Insurance Marketplace covering the first three months of open enrollment, October 1 through December 28, 2013.
Key statistics include:
- Through December, 2.15 million enrolled in either the federal Marketplace (1.2 million) or state exchanges (950k). That figure is now around 3 million.
- Of 7.7 million applications through December, 5.1 million were eligible for an exchange plan (rather than Medicaid or Medicare). 53% of applicants were eligible for subsidy.
- 80% of enrollees were subsidy eligible.
- 33% of enrollees were ages 55-64.
- 60% of enrollees chose Silver plan. 20% chose Bronze plan. 1% enrolled in catastrophic plans.
How Can Employers Reimburse Individual Health Premiums?
The short answer is that an employer can pay or reimburse individual or Marketplace premiums, but the payment or reimbursement must be done on a taxable basis. The opportunity to do it on a tax-free basis – whether directly, through an HRA, or through Section 125 – was effectively eliminated by joint IRS and DOL guidance issued in September.
I am aware that there is a (loud) voice in the market that says differently. However, I do not agree with that convenient interpretation, and that view is too aggressive and risky for employers to adopt. Any employer that pays or reimburses individual or Marketplace coverage in 2014 and does not reflect the payments as taxable income will be accepting (knowingly or unknowingly) significant risk under the ACA. In addition to my own work on the subject, I have discussed the topic at length with other attorneys and have read 30+ articles published by law firms. All have reached the same conclusion. There appears to be a clear mandate from the agencies in charge, and my strong recommendation is that employers follow that guidance.
Do you have comments about employer reimbursement? Share with them with us below. Also, make sure to subscribe to the COBRA blog at the top right corner of this screen.
Here’s another great update from our friend Jason M. Cogdill, Corporate Counsel & Benefits Attorney at ProBenefits, Inc.
On February 10, the IRS released the long-awaited final guidance on the employer mandate. The guidance (227 pages in length) largely confirms the 12/27/12 proposed guidance on the mandate, but there are significant additions and transition rules.
For a short summary of key details, attached is the Treasury “Fact Sheet” on the guidance with significant new items highlighted. If you would like further details right away, the IRS published an extensive Q&A on its website.
- While the mandate will take effect in 2015 as scheduled, there is a new exemption for 2015 for employers with less than 100 full-time employees,including full-time equivalents. This will allow a full year of delay (until 2016) for any employer that can certify that it is 50-99 during 2014. (Employers with 1-49 will continue to be fully exempt going forward.)
- Employers subject to the mandate in 2015 (100+ employers) will be required to offer coverage to at least 70% of full-time employees (rather than 95%) in order to avoid the A penalty (“sledgehammer”). This will help many large employers stage in coverage for employees not currently offered coverage.
- The maximum penalty for a 100+ employer in 2015 will be the number of full-time employees minus 80 (rather than minus 30).
- Many 100+ employers with non-calendar year plans will be able to comply as of the 2015 renewal date rather than 1/1/15. The transition rule in the final guidance is broader than the prior rule on this point.
- In order to determine whether the mandate applies in 2015, the IRS is allowing employers to use any consecutive 6-month period in 2014 (rather than the full calendar year).
- Employers with 100 or more full-time employees plus equivalents will have to comply with the mandate in 2015 as scheduled. However, there are at least 3 transition rules that will help these employers. These include:
- The IRS clarified and simplified certain rules regarding seasonal employees (new, broader 6-month rule applies), teachers and educational employees (including adjunct faculty), and governmental and nonprofit volunteer employees. Otherwise, the measurement period option for employers to determine eligible status (30-hour rule) remains in effect.
We will continue to share Jason’s updates in an effort to keep you on the front-edge of the Affordable Care Act rollout in the coming weeks and months. If you haven’t already done so, subscribe to our blog at the top of this screen.
With Valentine’s Day just around the corner, romance should be in the air. Unfortunately, for many HR professionals, thoughts of love may take a back seat to thoughts of compliance. Don’t despair! To help set the mood for February, we’ve highlighted a few romantic movie quotes and related them to health reform. You might be surprised at the parallels!
“Love means never having to say you’re sorry.” –Jenny (Ali MacGraw), Love Story
Like characters in a good love story, all employees have complexity, flaws and a few preexisting conditions. Now, as of 2014, the preexisting condition exclusion is history. Your company can help write happier health care endings by continuing to send a HIPAA certificate of creditable coverage when an employee leaves.
“You had me at hello.” –Renee Zellweger (Dorothy), Jerry Maguire
Make the most of first interview impressions! Now, with easier access to health care, potential employees can assess your potential fit based on your best employer attributes – and not just your health plan. Remember, your small business may be eligible for a small business tax credit if you purchase coverage through the Small Business Health Options Program (SHOP) Marketplace.
“I’ll have what she’s having.” –Other Customer (Estelle Reiner), When Harry Met Sally…
Starting in 2014, all healthcare plans (including group plans) need to provide “essential health benefits.” Essential health benefits must include services like “behavioral health treatment,” “prescription drugs,” and pediatric services that include oral and vision care. This may complicate health care in the short term, but in the end, we will all have what she’s having.
“Stop thinking about what everyone wants, stop thinking about what I want, what your parents want! What do you want Allie?” –Noah (Ryan Gosling), The Notebook
Once your company gets beyond the “pay or play” decision, you may decide that a private insurance exchange is the most cost-effective solution. According to Accenture, one million people will enroll in private exchanges this year, and the number may grow to 40 million by 2018. The main appeal for employers is more options in plan design and the ability to provide employees with more choices. Of course, the first step is to know exactly the type of health insurance your company wants to provide.
As Forest Gump once said … “Life is like a box of chocolates.” And so is life in human resources as you bite into the never-ending changes to state and federal laws. Whatever you do, stay passionate and informed … and find a partner you can count on. U + COBRAGuard = BLISS!
Do you have any love story parallels to add to our list? If so, post them in the comments below. And, if you haven’t already done so, subscribe to the COBRA Blog at the top of this page so we can send you more good stuff like this!
Here’s another great update from our friend Jason M. Cogdill, Corporate Counsel & Benefits Attorney at ProBenefits, Inc.
The biggest ACA news of 2014 is not what has happened but what has not happened. Most significantly, the final guidance on the employer mandate has not yet been released (update below). Also, there was speculation about a big announcement before or after last Tuesday’s State of the Union address by President Obama, but none occurred. The State of the Union contained no surprises regarding the ACA. If you did not see or read the President’s comments on topic, you can read them here.
I anticipate that February and March will be important months in terms of guidance and developments, including the final stretch before the end of the Marketplace open enrollment period on March 31. It was recently reported that there are 56 active items of ACA guidance currently in the works between the IRS, DOL, and HHS. 43 of the 56 items are expected to be released during 2014, and several of them – starting with the employer mandate guidance – are needed soon. In addition, Congressional negotiations on the debt ceiling and the federal budget could have ACA implications.
Our continuing challenge is education. Most Americans (62% according to a recent Kaiser Health News poll) do not realize that most significant ACA provisions have taken effect. 2013 was in many ways a year of survival. 2014 will be a year of strategy. We will find a way to address the employer mandate and other considerations.
Recent Developments & Guidance Items
A summary timeline of developments over the last six weeks is below.
- 12/16/13: IRS released Notice 2014-01 regarding Section 125, FSA, & HSA elections and reimbursements for same-sex spouses following US v. Windsor.
- 12/18/13: CMS issued Q&As on SHOP enrollment & minimum participation requirements.
- 12/19/13: CMS issued letter to consumers with cancelled policies & expanded the individual mandate hardship exemption to allow purchase of catastrophic coverage by those whose coverage was cancelled.
- 12/20/13: HHS, DOL, & IRS issued proposed regulations regarding excepted benefits under HIPAA & ACA application to such benefits.
- 12/24/13: IRS issued corrections to final regulations on individual mandate penalties for individuals not maintaining minimum essential coverage in 2014.
- 12/30/13: HHS announced required reinsurance fee for 2015. The new amount will be $3.67 per covered member per month ($44 per year), down from the 2014 amount of $5.25 per month ($63 per year). The reinsurance fee is scheduled to decrease again in 2016 and then expire. HHS also announced a new exemption for self-insured, self-administered plans that will impact certain collectively bargained health plans.
- 1/9/14: IRS released FAQ on OOP limits, expatriate plans, & fixed indemnity policies.
- 1/10/14: In a preview of upcoming employer mandate issues, Treasury posted a letter confirming that hours of certain voluntary firefighters and emergency personnel will not count in determining full-time employee or full-time equivalent status.
- 1/13/14: Marketplace enrollment report released for October 1 through December 31 (summary).
- 1/15/14: U.S. District Court for the DC District upheld the government’s position in Halbig v. Sebelius, a challenge to the award of ACA premium subsidies for coverage not purchased through state exchanges.
- 1/17/14: HHS released additional materials for agents utilizing Marketplace.
- 1/27/14: IRS issued proposed regulations on individual mandate addressing treatment of HRA coverage & wellness incentives.
We will continue to share Jason’s updates in an effort to keep you on the front-edge of the Affordable Care Act rollout in the coming weeks and months. If you haven’t already done so, subscribe to our blog at the top of this screen. And, if you’re thinking about outsourcing cobra administration to free up HR team to focus on health reform, download this outsourcing guide.
COBRA CONUNDRUMS reprinted from the December, 2013 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.
Dear COBRA Bob,
My clients are inundating me with questions about the future of COBRA. They seem to think that if coverage through the Marketplace is more affordable, COBRA will fall by the wayside. Your thoughts?
- Not Sure What to Believe in Bellevue
Dear Not Sure,
In September, as everyone eagerly awaited the launch of the Marketplace websites, there was quite a bit of chatter in the press regarding the future of COBRA. Many were concerned that COBRA-eligible people may not understand that they could also access coverage through the Marketplace, and that coverage could be more affordable than the single option available through COBRA.
However, now that we’re a few months into the Affordable Care Act (ACA) open enrollment, it’s clear that the choice between Marketplace coverage and COBRA coverage is anything but clear cut. A lot depends on where you live and how many carriers offer plans in your state. In some states, consumers have been disappointed to see that the options available through the state Marketplace are less comprehensive and much more expensive than the employer-sponsored option. For example, in my state, our group health rates went up 7 percent but my rate for comparable coverage in the Marketplace is 50 percent higher with a much higher $12,000 deductible!
With this in mind, COBRA may continue to be the best option for many people, particularly when deductibles are considered. For example, let’s assume an employee has a $3,000 deductible under an employer-sponsored plan and had spent $1,800 toward satisfying the deductible at the time of his COBRA-qualifying event. If the employee elects the COBRA plan, he keeps the same deductible and the $1,800 accrued toward satisfying the deductible. However, if the individual chooses a new policy through the Marketplace, his deductible changes and the accrual starts over. So, even if the COBRA premium costs a little more each month, many individuals may find it preferable to stick with their existing plans under COBRA – particularly if the new Marketplace plan deductible is $12,000!
Beyond personal preferences, there are a few other reasons COBRA is here to stay for now and into the foreseeable future.
1. COBRA encompasses more than just medical plans. In 1996, dental plans were added, and in 2001 the qualifying plan definition was expanded to “health care,” which covers diagnosis, treatment and cures. These types of plans are not available through the Marketplaces (yet), and so employees will continue to rely on COBRA to bridge these other types of coverage gaps.
2. The issue of creditable coverage continues. Preexisting condition limitations will still be of concern until January 1, 2015, when all employers’ plans have finally transitioned to ACA-compliant plans. Therefore, to prevent transitioning employees from encountering preexisting condition clauses on plans that transition mid-year, employers must continue to provide certificates of credible coverage throughout 2014.
3. Notification duties remain – for group plans and SHOP plans. Regardless of where employers get coverage (either through group health plans or through SHOP exchanges) their COBRA notification duties continue, and they are subject to fines for non-compliance.
Interestingly, the Marketplace election period and the COBRA election period are both 60 days – but the start dates are different. The Marketplace 60-day period begins the day of the qualifying event. The COBRA 60-day period begins the day the employer sends the election notice.
How could this small discrepancy create more late-term COBRA elections?
Consider this scenario: An individual procrastinates on making a coverage decision. On the 65th day, he herniates a disc in his back and needs extensive treatment. He realizes that he is no longer eligible for the Marketplace, so he rushes to elect COBRA before the election period expires. Suddenly, it’s very important to know the date the COBRA election notice was sent.
As you can see in this scenario, proactive and well-documented communication will be more essential than ever, as many COBRA-eligible individuals will take longer to make elections as they investigate options available through the Marketplace. It’s crucial that employers keep airtight documentation of their notification practices and dates in case discrepancies arise.
While COBRA may feel like an inconvenience, it is still an important benefit for American workers. And in this season of giving, it’s important to remember that COBRA was created in the spirit of helping others. I still wholeheartedly believe in the value of COBRA. Do you believe?
Do your best,
The Affordable Care Act eliminated the concept of preexisting condition exclusions as of 2014. From a 30,000-foot view, this may seem to spell the end of certificates of creditable coverage, a provision of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
As you probably recall, a certificate of creditable coverage is proof of health coverage, particularly important when employees change companies. Prior to the Affordable Care Act, carriers would have a preexisting existing exclusion period of six to 12 months, with an additional caveat that the exclusion could be waived so long as their creditable coverage did not indicate a coverage gap greater than 63 days.
So, now that preexisting conditions no longer matter, is the certificate of creditable coverage obsolete? Read on to learn why it is still crucial to nail down the dates of creditable coverage.
Existing Plan Renewals
Most media coverage affirmatively states that preexisting condition exclusions are banned after January 1, 2014. However, the fine print says that the ban takes effect for plan years beginning on or after January 1, 2014. As you know, health plans renew throughout the calendar year so many 2014 plans have not yet taken effect.
Let’s say that your plan comes up for renewal in November 2014. Now time travel to September 2014. You’ve just hired someone who quit his previous job in February 2014 and lost health coverage on the same date. Your company’s pre-ACA health insurance plan has preexisting condition exclusions, and thus requires a certificate of creditable coverage. Your new employee’s old company didn’t bother to send a HIPAA certificate. Because your 2014 plan year had not yet begun when you hired the new employee, you need documentation to support application of the preexisting condition exclusion which would be in place until November 2014. If you ignore the preexisting condition exclusion and provide coverage anyway, you may be on the hook for claims incurred before November 2014 as the insurance company is not likely to pay claims for which coverage should not have existed.
It’s the responsibility of the previous employer (and your company, too) to issue HIPAA certificates of creditable coverage to avoid HR headaches like this. In fact, the Department of Labor requires the issuance of certificates of creditable coverage until at least December 31, 2014.
A Line in the Sand
Even for those who get coverage through the Marketplaces, and even after the transition of 2014, individuals will still need some type of paperwork that says when previous coverage ended. This way, everyone (old plan/new plan) can avoid confusing overlapping coverage situations. There has to be a defined cutoff date to facilitate coordination of benefits.
The Short Answer
Preexisting condition exclusions will eventually become the dinosaurs of the health insurance world. However, despite this fact, clear communication and plan coordination will remain crucial. Until we receive new Department of Labor guidance, you should plan to always send a coverage termination notice, any required COBRA notices and a HIPAA certificate of creditable coverage when an employee leaves your company.
Want more COBRA administration and health reform updates? Subscribe to our blog in the upper right of this screen.
Last month, we discussed what happens when an employee is naughty at a holiday party. If an employee’s behavior is considered “gross misconduct,” is the employee still eligible for COBRA benefits? It’s a tricky subject, because the U.S. Department of Labor’s notes that, “the term ‘gross misconduct’ is not specifically defined in COBRA or in regulations under COBRA.”
Last month, however, we quoted the Employee Benefits Legal Blog, which stated that an employee’s conduct that is intentional, reckless, or extreme counts as gross misconduct.
The court opinion Shrimpton v. Quest Diagnostics Inc. also provides a helpful two-part litmus test for what constitutes employee gross misconduct:
- Employee gross misconduct possesses a “substantial nexus” to the workplace, where the conduct involved the employer, a fellow employee or a current or former client.
- Employee gross misconduct must be intentional, wanton, willful, deliberate or reckless. Or the misconduct was performed with deliberate indifference to an employer’s interests.
And yet, that litmus test is still pretty broad, isn’t it? It also begs the question: how “gross” does gross misconduct have to be?
Here are some examples of truly gross conduct that will help you with determining the most appropriate way for the administration of COBRA benefits:
- Stealing or destroying property: It happens more than you think. The U.S. Chamber of Commerce states that 75% of employees steal from their employer. This can include small-scale theft or an employee stealing something virtual files or intellectual property. Additionally, if an employee willfully and intentionally destroys your company’s property, that counts as gross misconduct. That can be as simple as intentionally denting the office copier or as serious as setting the building on fire.
- Violence against a co-worker or a manager: Workplace violence has been decreasing over the past several years, but millions of U.S. workers still experience workplace violence every year, according to the National Center for the Victims of Crime. For example, the center notes that, “In 2011, 456 persons holding management positions were fatally injured in the workplace.” Further, “of the non-fatal violent crimes committed against victims who were working or on duty in 2008, 82 percent were simple assaults [and]15 percent were aggravated assaults.” It’s worth noting that simple assault easily qualifies for gross misconduct.
- Sexual assault and rape: The National Center for the Victims of Crime states that two percent of all non-fatal violent crime at the workplace was rape or sexual assault. If an employee sexually assaults a co-worker, manager or a current or former client, then the employee would be guilty of gross misconduct.
Keep in mind that employers should conduct a thorough investigation and gather all of the facts. It’s important to determine whether an action – such as theft or property damage – was accidental or intentional. Immediately involve law enforcement and physicians in all cases of violence or rape and carefully document the incidents.
Gross misconduct is a delicate subject, and if you’re meticulous about documentation, you’ll increase a positive outcome for your company and current employees. It will also help answer any questions regarding COBRA eligibility or administration for employees guilty of gross misconduct.
Did you know? COBRAGuard helps employers with more than just COBRA administration. Ask us about eligibility and enrollment, direct billing and billing reconciliation. Also, make sure to subscribe to our blog in the top right corner of this screen.
COBRA CONUNDRUMS reprinted from the October, 2013 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.
Dear COBRA Bob,
With all the Affordable Care Act uncertainty, I’ve decided to focus more effort on voluntary benefit products. However, I’m not sure how COBRA works in the voluntary arena. Can you enlighten me?
- Perplexed in Peoria
Great question. I’ve noticed that both employers and brokers seem to be showing more interest in voluntary benefits lately and there’s a great deal of confusion about how COBRA applies.
COBRA’s plan applicability has expanded since the law was first passed in 1986. Initially, only medical plans qualified. However, in 1996, dental plans were added, and in 2001 the qualifying plan definition was expanded to “health care,” which covers diagnosis, treatment and cures. With the new definition, COBRA began applying to other types of plans such as flexible spending, wellness and cancer care.
How do you know if COBRA applies to a specific plan?
If you’re wondering if COBRA applies to a plan, use the following four-part test:
1. Is the company big enough to worry about COBRA? COBRA applies to companies that employ at least 20 people on more than 50 percent of their typical business days.
2. Does the plan qualify as a “group plan” under the Employee Retirement Income Security Act (ERISA)? A group plan is a plan, fund or program that is maintained or established by the employer for the purpose of providing health care. Note that an employer-sponsored plan can include voluntary plans even when the employee pays all of the premium and the coverage is portable. Health Reimbursement Accounts (HRAs) are considered group plans.
3. Does the plan in question fall under the “health care” category? Health care includes “the diagnosis, cure, mitigation, treatment or prevention of disease or any undertaking for the purpose of affecting any structure or function of the body.” With this definition in mind, COBRA almost always applies to cancer, gap, critical illness and dental plans.
4. Could the plan qualify for ERISA Safe Harbor? Some voluntary health care plans with very minimal employee involvement may fall under the ERISA Safe Harbor, and therefore be exempt from COBRA. This is a gray area in which you should never make assumptions. If you think a plan may qualify for ERISA Safe Harbor, ask the carrier and employer’s legal counsel for their opinions. The employer should clearly document their reasons for not providing COBRA in case they are ever called into question later. One test that may be applied relates to plan cost: Is the plan available at the same cost to the individuals (outside the organization) as it is to those who are employees of the organization?
Which plans are definitely NOT subject to COBRA?
Plans that do not fall under the health care umbrella are not subject to COBRA. Therefore, COBRA does not apply to employer-paid or voluntary life insurance, disability insurance, long-term care insurance and legal assistance programs. Also, COBRA typically does not apply to the bank account side of Health Savings Accounts (HSAs) because the bank account is in the name of the individual rather than the employer. Please note that the group-sponsored high deductible medical plan attached to the HSA is definitely subject to COBRA.
To sum things up, COBRA applies to most health care related voluntary plans. When in doubt, check with the plan’s carrier.
Do your best,