“Learn how to see. Realize that everything connects to everything else.” -Leonardo da Vinci.
Maybe the famous scholar from the 1400s wasn’t talking about the continuation of group health plan coverage. But, today more than ever, this quote is right on point for sponsors and administrators of employee benefit programs.
In healthcare, just as in everything else, keeping up with compliance can make your head spin. Your employee benefit program likely consists of many moving parts: medical, dental, vision, flex spending, employee assistance programs, life insurance, and more. You likely have different people administering each part. It is time to learn from da Vinci and realize that all of these parts are connected in many ways including eligibility, enrollment, continuation laws, and reporting requirements. Failing to integrate your employee benefit administration can lead to major compliance pitfalls. Consider the following:
Flex Administration and COBRA
Many plan sponsors rely on the group health plan third party administrator for COBRA compliance. Flex spending is often seen as a function of payroll and is administered by a separate outside administrator. Plan sponsors often do not realize that COBRA is required for health flex spending accounts with a positive balance. If they are aware of the requirement, they often rely on the flex administrator to handle COBRA. This can lead to several problems.
COBRA election rates for flex spending plans are extremely low. For example, our clients saw an average of a 2.5 percent flex COBRA election rate for 2015 and a 1 percent election rate so far for 2016. This low election rate, combined with a possible lack of knowledge, leads many flex administrators to push COBRA compliance to the back burner. Many even ignore COBRA completely. How much effort is a flex administrator really going to put into calculating flex COBRA premiums and ensuring up-to-date COBRA notices for something that happens 1percent of the time?
Plan sponsors who rely on flex administrators to handle COBRA may be hit with daily penalties for improper or nonexistent COBRA notices for the flex plan. Further, plan sponsors who hire a COBRA administrator but rely on a separate flex administrator to determine eligibility for COBRA based on the flex account balance, may find that the flex administrator is not communicating eligibility information with the COBRA administrator.
HIPAA Special Enrollment and COBRA
HIPAA's special enrollment rules require group health plans that offer dependent coverage to offer enrollment outside of normal open enrollment times to certain newly acquired spouses and dependents. The IRS COBRA regulations clarify that a qualified beneficiary who has timely elected and paid for COBRA coverage may enroll family members under these HIPAA special enrollment rights.
As da Vinci, once explained, everything is connected. That includes COBRA, HIPAA and your enrollment and eligibility systems. Does your enrollment system allow a COBRA participant to enroll a newly acquired spouse? Does your enrollment system confirm that the COBRA participant’s premium payments are up-to-date? COBRA requires a 30-day premium payment grace period. How does your enrollment system handle adding a newly acquired dependent if the COBRA participant is currently within the premium payment grace period? Can the newly acquired dependent be added and then retroactively terminated if the COBRA premium is not ultimately received?
Open Enrollment, Eligibility and COBRA
The IRS COBRA regulations provide that “If an employer…makes an open enrollment period available to similarly situated active employees with respect to whom a qualifying event has not occurred, the same open enrollment period rights must be made available to each qualified beneficiary receiving COBRA continuation coverage.” Thus, COBRA qualified beneficiaries who are current with their payments and have not exhausted COBRA can make changes to coverage and add dependents during open enrollment.
Does your enrollment system and/or process include COBRA qualified beneficiaries? Does it ensure that the COBRA qualified beneficiary has made timely COBRA premium payments before offering enrollment? Does your enrollment system ensure that communications sent in October for a December open enrollment do not go to COBRA qualified beneficiaries whose COBRA coverage will end in November or December? Remember, the COBRA regulations are simply a minimum requirement. Offering enrollment for January to a COBRA participant whose COBRA expires in December may create an argument that the minimum COBRA period has been extended by the employer.
Additionally, with the exception of a new baby or newly adopted child, anyone added during special enrollment or open enrollment does not become a qualified beneficiary. Thus, COBRA for these added individuals is dependent upon continuation of the original qualified beneficiary’s COBRA. For example, if a qualified beneficiary adds a new spouse to his COBRA during open enrollment but then dies two months later, COBRA for the newly added spouse ends. Enrollment and eligibility systems must communicate the status of newly added dependents to the COBRA administrator in order to avoid unnecessarily extending the duration of COBRA.
Situations like those discussed above mandate integration of enrollment, eligibility and COBRA. Everything is connected … especially in the employee benefits world. Plan sponsors and advisors should look at employee benefit offerings as a whole to determine if their current systems and administrators provide the optimal level of integration.
This article was reprinted from the October 2016 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.