Regardless of what you may have heard, COBRA administration continues to be required even with health reform and the elimination of pre-existing condition exclusions. That said, staying up to date with both the Affordable Care Act and COBRA compliance requirements can be overwhelming, and therefore, outsourcing COBRA administration has grown in popularity over the years. In 2004, the Society of HR Managers issued a study indicating that 38 percent of employers outsource their COBRA administration. In the last 10 years, that number has likely doubled.
With ACA, HIPAA, ERISA, EBSA, and COBRA compliance growing increasingly complicated each year, it’s tough for most HR departments to maintain enough expertise to guarantee company compliance. Furthermore, automation has driven down COBRA outsourcing costs, making it a highly cost-efficient solution.
If you’re weighing the COBRA outsourcing decision, below are keys to consider:
1. Search for a better, faster, stronger solution. Ask prospective COBRA administrators about:
- Indemnification for your clients
- Their average processing speed for mailing COBRA notices
- How they manage premium remittance
- How many times they’ve been taken to court and the outcomes in each case
- How long they’ve been in business
- If they have records of every COBRA transaction they’ve ever done
2. Find a vendor that will help you save time, money and resources. In real estate, the old adage is “location, location, location.” In HR and benefits administration, it’s “save, save, save.” Resources are scarce and companies are becoming more reliant on their outsourced vendor partners. When forced to do more with less, automation, expertise, and time become even more critical. Better COBRA administrators allow clients to conduct most of their business over the Internet via COBRA software, leveraging a Web-based service as a key communication tool and payment processing engine to give their associates and former associates the tools they need to make informed decisions about their benefits.
3. Proactively manage risk. This is probably the most overlooked and dangerous part of the COBRA outsourcing decision. COBRA administration is all about communicating with plan participants as to their rights to continue their employer-sponsored plans, when they become eligible under a COBRA qualified plan, or when they experience a COBRA qualifying event. There are significant penalties at risk for failure to properly notify qualified beneficiaries and their family members of their COBRA rights. Remember, with ACA came another 17,000 IRS agents who are to help enforce the ACA regulations as well as those regulations for which they have always had oversight, including COBRA.
Whether you outsource COBRA or not, it’s a good idea to carry employee benefits liability insurance (EBLi) as part of your suite of business protection. EBLi is designed to protect employers from errors or omissions in the administration of employee benefit programs, such as failure to advise employees of benefit programs or program provisions. Coverage of this exposure is usually provided by endorsement to the general liability policy but may also be provided under a fiduciary liability policy.
Want to learn more about outsourcing with COBRAGuard? Request a demo today.
COBRA CONUNDRUMS is reprinted in part from the December 2014 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers. Want to receive more insightful benefit administration tips? Subscribe to our blog in the top right corner of this screen.