Test your COBRA compliance knowledge: Are you required to offer COBRA for your vision plan? What about life insurance? Get the low-down on COBRA Compliance requirements here.
Since the IRS installed their revised audit guidelines for COBRA compliance in March 2012, you’ve had even more incentive to keep up on the laws and requirements. When you add in the ramifications of new health care legislation, it’s not surprising that employers have plenty of confusion and questions about COBRA laws. Test your knowledge about what COBRA covers with the questions below.
1. Which types of plans does COBRA qualify?
When COBRA was passed by Congress in 1986, only medical plans qualified. In 1996, dental plans were added, and in 2001 the qualifying plan definition was expanded to “health care,” which covers diagnosis, treatment and cures. This significantly broadened COBRA’s applicability to other types of plans such as flexible spending, wellness and cancer care.
According to the Department of Labor, COBRA applies to all private sector group health plans maintained by employers who have at least 20 employees on more than 50% of their typical business days. COBRA also applies to plans sponsored by state and local governments, but the law doesn’t apply to plans sponsored by the federal government.
2. What benefits are covered under COBRA?
The Department of Labor stipulates that a qualified beneficiary under COBRA must receive the same benefits, choices and services that a similarly situated participant or beneficiary is currently receiving under your health plan. This is usually the same coverage that the qualified beneficiary had immediately before the qualifying event.
3. What exactly is covered under medical care?
For purposes of COBRA, “medical care" includes:
- Inpatient and outpatient hospital care
- Physician care
- Surgery and other major medical benefits
- Prescription drugs
- Dental and vision care
Life insurance and disability benefits are not considered "medical care” and COBRA does not cover plans that provide only life insurance or disability benefits.
Those with cancer or other preexisting conditions are generally covered under COBRA, assisted by HIPAA laws, and as long as they meet certain criteria, they should be able to buy individual health insurance that will cover their cancer care costs immediately.
4. How does COBRA affect my employees’ flexible spending accounts (FSA)?
An employee may be able to sign up to extend their FSA benefits under COBRA coverage, which also applies to money in their flexible spending accounts. They are also not required to use COBRA for health insurance to have COBRA coverage for their flex plan.
5. What about voluntary plans?
This is a tricky one. Although, under Labor Reg. § 2510.3-1(j), ERISA normally does not apply to a program where there is insufficient involvement—including the absence of contributions—on the part of the relevant employer or employee organization, the final regulations provide that COBRA would apply to a plan even though the employer or employee organization makes no contributions to the arrangement if coverage under the plan would not be available at the same cost to the individual but for the individual's employment-related nexus to the employer or employee organization. Treas. Reg § 54.4980B-2, Q & A 1(a). So, with that with that in mind, do not assume that COBRA does not apply to voluntary benefits.
6. How does COBRA apply to our wellness program?
With no significant federal focus on the COBRA implications of wellness programs to date, this issue can get dicey. There are a number of factors, agencies and triggers that can come into play depending on your situation, and the interaction of wellness programs, ERISA (the Employee Retirement Income Security Act of 1974), COBRA, Medicare Part D, and HIPAA guidelines is sadly not well-defined.
In general, to the extent your wellness program provides medical care (many contemporary programs do), it is subject to COBRA. In theory at least, a COBRA beneficiary would have the right to pay for continuation coverage under the wellness program (health screenings, smoking cessation program, etc.). A fairly thorough primer on guidelines pertaining to wellness programs can be found here:
http://www.lockton.com/Resource_/InsightPublication/1261/Wellness_20Programs_111309.pdf
Navigating COBRA laws is a daunting but necessary part of controlling your health care costs, your COBRA administration, and your bottom line. By surrounding yourself with knowledgeable HR, health care and legal professionals and available information, you’ll be able to make COBRA administration decisions that make sense for your organization. For more COBRA compliance information, consult the Department of Labor website at: http://www.dol.gov/ebsa/publications/cobraemployer.html
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