In honor of Halloween, we’re having a little fun with the blog today. Below are three COBRA administration horror stories that just might be scarier than the ghosts and goblins knocking on your door this week.
#1: The cashed COBRA check that never arrived at its destination – This one is truly as terrifying as it sounds. The COBRA participant faithfully remitted the premium to the employer on time. The employer deposited the check and forwarded the premium to its insurance broker to pay the carrier. The broker neglected to pay the carrier and the carrier subsequently canceled COBRA coverage. In the meantime, the COBRA participant was involved in a terrible motor vehicle accident resulting in $180,000 in medical bills! Now for the thrilling suspense: Who do you think is getting sued?
#2: The $24,000 COBRA overpayment that sucked the credibility out of HR – You’ve probably heard this tale before as it’s a classic COBRA thriller. In this case, our main character is a harried HR professional who delegated the task of carrier bill audit to an underling who quit her job without leaving a solid TO DO list of outstanding items and recurring duties. As such, more than 3 years passed without thorough review of the carrier bill. And yes, in that time, one COBRA participant stopped coverage and the carrier was never notified. That participant’s premium was charged and paid month after month. The latent profit killer was eventually uncovered but not until a $24,000 overpayment had accrued. Can you imagine the trepidation involved with reporting that oversight?
#3: The $83,063.45 failure to communicate with a wicked punch line – In this fateful situation, the soon to be departed employee had a group dental plan but no group medical plan. In the months following the termination, the employee claimed she had not been given COBRA eligibility notification for the dental plan and the employer could not provide documentation of the notice to prove otherwise. Ultimately, the employer had to pay a fine of $37,950 for failure to provide notice; $42,192.50 for attorney fees; and $2,910.87 for other costs adding up to a grand total of $83,063.45! This is an expensive lesson that could have been warded off with 10 minutes, a letter and a stamp – no exorcist required!
While these examples are chilling and thrilling, they are nothing short of deadly if they happen to you. And here’s the clincher – these terrifying scenarios occur far more frequently than the standard poltergeist. Anytime HR gets busy (which can be every month of the year), oversights occur. Got turnover? ACA compliance headaches? Open enrollment worries? Whenever your HR professionals are distracted, the COBRA gremlins sneak in.
Fortunately, outsourcing COBRA is way more effective than hanging a horseshoe or a bunch of garlic on your door. It’s also the easiest way to ward off notification, premium, collection and bill audit oversights – once and for all!
Happy Halloween from our team to yours!