Every year, a large percentage of employers make a serious mistake when they change health plans. It’s not an intentional mistake – in fact, employers often don’t even realize what they’re doing until it’s too late. What is this costly mistake that leaves many an HR professional weeping with regret after the New Year? It is automatically changing COBRA administrators just because there’s a change in the health plan provider.
While it’s true that many insurance brokers have favorite recommended administrators, “favorites” are not a good reason to switch. There’s too much labor and record-keeping at stake.
To help you understand the gravity of the COBRA-jump decision, I offer an example you can all understand: banking. When was the last time you personally changed banks? When was the last time your business changed banks? Most of us avoid bank-hopping simply because it’s a huge hassle. Your bank has your payment history and if you need to balance your checkbook or prove that you made a payment six months ago, it’s tough to do when you frequently change banks. The same is true of COBRA.
Think about everything that your team puts into COBRA administration system set up. It’s a little like setting up online banking. If you use a COBRA software, you have to enter the COBRA-applicable plans, the participants, and all other related data. Why start from scratch if it’s not needed?
Now, take a moment to think about your record-keeping. Every time you change COBRA administrators, you interrupt the chain of proof, and that could cost you big time in a COBRA dispute. If you need to establish proof that a notice was sent appropriately, and your record-keeping is spread across three different systems, it could be challenging.
So, as you reevaluate your health plans and make open enrollment decisions, give COBRA administration the due diligence it warrants.
- Consider your current COBRA administrator’s services. Are you satisfied? Do they take care of notices, record-keeping and secure premium collection? Is there any real reason to change vendors?
- Clearly communicate with your broker. Make sure your broker knows your intentions with regard to COBRA administration. Don’t let your broker make assumptions about how you want to proceed.
- If you are a broker, help your employer clients objectively evaluate the pros and cons of switching COBRA administrators. Realize that this is a big decision that should not be taken lightly.
- Beware of “free” offers. As you’ve probably discovered, free never really means free. If a carrier offers free COBRA administration, ask about the length of the free offer. Is it free next year and for the three years after that? Will the carrier provide free labor to accommodate the new program set up? Will the carrier provide free transfer and storage for all your COBRA data for the past seven years? How will they assist you if a dispute arises that requires proof of notification from two years ago?
In life, there are a lot of opportunities to try new things on a whim – new restaurants, new vacation venues and even new paint colors are fun. However, there are other things that require careful consideration because mistakes are painful and long lasting. COBRA administration is one of those things. Don’t change COBRA administrators or COBRA software on a whim. Think about what’s involved and give the decision the due diligence is deserves.
For more on REASONS TO SWITCH and REASONS TO STAY with your COBRA administrator, download our free report, “Is it Time to Break Up with Your COBRA Administrator?”