When managing group health insurance plans, employers often face the challenge of aligning COBRA premiums with midyear increases in insurance premiums. However, the IRS COBRA regulations generally do not permit midyear increases in COBRA premiums. Here’s what you need to know:
Understanding COBRA Premiums
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows qualified beneficiaries to continue their group health coverage after certain qualifying events, such as job loss. The premium for COBRA coverage is capped at 102% of the “applicable premium” for the coverage, which can increase to 150% during a disability extension.
Fixed Determination Period
The applicable premium must be computed and fixed before the start of a 12-month “determination period” and generally cannot be changed until the next determination period. This means that even if your insurer increases premiums midyear, you cannot pass this increase onto COBRA beneficiaries until the next determination period.
Exceptions to the Rule
There are three exceptions to this general rule:
Disability Extension: If a qualified beneficiary’s maximum coverage period is extended due to disability, the premium can increase from 102% to 150%.
Undercharging: If the plan is charging less than the maximum permissible amount (102%), it can increase the COBRA premium to that level.
Coverage Changes: If a qualified beneficiary changes coverage from one benefit package or coverage unit to another, the premium can be adjusted to the new rate determined before the determination period began.
Strategic Planning for Employers
To avoid the complications of midyear premium increases, employers should:
Align the insurer’s rate period with the plan’s 12-month COBRA determination period.
Lock in the premium charged by the insurer for the entire determination period, at least for COBRA purposes.
By understanding and planning for these regulations, employers can better manage their COBRA premiums and ensure compliance with IRS rules.
When managing COBRA coverage, it’s important to know what happens if a qualified beneficiary pays less than the full premium amount. Here’s a simplified guide:
Timely Payments and Grace Periods
Qualified beneficiaries must make timely COBRA premium payments, with a 30-day grace period each month. If the full premium isn’t paid by the end of this period, coverage can be terminated. However, there are special rules for small shortfalls.
What is an Insignificant Shortfall?
An insignificant shortfall is a payment that is less than or equal to the lesser of $50 or 10% of the required premium. For example, if the premium is $490, a shortfall of up to $49 is considered insignificant.
Handling Insignificant Shortfalls
Notify the Beneficiary: Inform them of the shortfall and give them a reasonable period (usually 30 days) to pay the difference.
Grace Period: Allow the beneficiary to pay the remaining amount during this period to avoid termination.
Accept Underpayment: Alternatively, the plan can accept the underpayment as full payment.
Best Practices
Include Procedures: Clearly outline shortfall procedures in your COBRA plan.
Prepare Notices: Have a standard notice ready for shortfalls.
Prompt Notification: Send the notice as soon as a partial payment is received.
By following these steps, you can manage COBRA coverage effectively and ensure compliance with regulations. This helps prevent unnecessary termination and gives beneficiaries a fair chance to maintain their health benefits.
COBRA, the Consolidated Omnibus Budget Reconciliation Act, provides employees with the option to continue their health insurance coverage after leaving their job. However, certain circumstances can lead to the early termination of this coverage. One such circumstance is the submission of fraudulent claims.
Terminating COBRA Coverage for Fraudulent Claims
A qualified beneficiary’s COBRA coverage can be terminated for submission of fraudulent claims if three key requirements are met:
The health plan must allow the termination of active employees’ coverage for the same reason.
The plan must permit the termination of COBRA coverage for cause.
The plan’s COBRA notices and communications must disclose the plan’s right to terminate coverage for cause.
Regulatory Guidelines
COBRA regulations specify that a qualified beneficiary’s coverage may be terminated for cause on the same basis that would apply to similarly situated active employees under the terms of the plan. This includes the submission of fraudulent claims. Thus, if an active employee’s coverage can be terminated for submission of fraudulent claims, COBRA coverage can be terminated early for the same reason, provided it is allowed by the plan and disclosed in COBRA notices and the plan’s summary plan description.
Proceeding with Caution
Terminating coverage early is a decision that should be made with caution. Employers wishing to terminate COBRA coverage early for other types of misconduct would need to analyze the circumstances to determine whether the plan would allow termination of an active employee’s coverage for that type of misconduct. It is advisable to consult with legal counsel and the plan’s insurer or stop-loss insurer if applicable.
Final Steps
If you decide to terminate the qualified beneficiary’s coverage based on fraudulent submission, remember to send the required notice of termination of COBRA coverage to any qualified beneficiary whose COBRA coverage terminates before the expiration of the maximum coverage period.
In conclusion, while it is possible to terminate COBRA coverage early due to fraudulent claims, it is a decision that should be made carefully, following the guidelines set forth by your health plan and COBRA regulations.
LEAWOOD, Kansas – NueSynergy, Inc., one of the nation’s fastest growing employee benefits and billing administrators in the country, is pleased to announce its preferred partnership with Broker Builder Solutions (BBS), a national leader in support services for the benefits and technology industry.
“NueSynergy is an industry partner that reflects our shared commitment to solution-oriented strategies for benefits brokers and Human Resource professionals within the employee benefits sector,” said Tonya Taylor, Marketing Leader and Client Relationship Liaison at BBS. This alliance leverages both teams’ expertise to educate clients and effectively provide solutions to their benefits administration and technology challenges. Our shared foundation of outgoing and professional staff is crucial in delivering excellence to the industry and the companies we serve. Through this collaboration, BBS looks forward to expanding our network of trusted benefits professionals.”
NueSynergy continues to achieve exceptional business results with innovative products like its SpouseSaver Incentive Account and COBRAcare+ administration. NueSynergy will work with BBS to offer agents and agencies a wide variety of administrative services for their new and existing employer clients.
“After investing heavily in technology and expansion of our overall infrastructure, NueSynergy has concentrated on partnering with well-known benefits leaders as we continue to expand our nationwide presence,” said Josh Collins, President of NueSynergy. “As we continue to focus on industry-leading service and expanding administration solutions for employers, we have found Broker Builder Solutions to be a natural fit in helping us build new broker and client relationships.”
About NueSynergy NueSynergy is known for industry-leading service, innovative technology, and excellence in providing full-service administration of consumer-driven and traditional account-based plans to employers of all sizes and sectors. Headquartered in Leawood, Kansas, NueSynergy also has locations in Arizona, Florida, Idaho, North Carolina, Pennsylvania, Virginia, Washington, and Rzeszów, Poland.
NueSynergy offers a fully integrated suite of administration services, which include Health Savings Account (HSA), Health Reimbursement Arrangement (HRA), Flexible Spending Account (FSA), Lifestyle Savings Account (LSA), and COBRAcare+ administration as well as SpouseSaver Incentive Account, Combined Billing, Direct Billing, and Specialty Solutions. For more information, visit www.NueSynergy.com.
About Broker Builder Solutions Broker Builder Solutions is dedicated to assisting organizations with their benefits administration needs. Whether setting up a new benefits administration platform or maintaining/leveraging an existing platform, BBS can help. With over 15 years of benefit administration experience, the BBS team are experts in leveraging Ben Admin platforms to provide seamless implementations and carrier file transmissions. But their most important win is fostering positive and long-lasting relationships with all organizations across the benefits industry ecosystem.
BBS has expertise in Client Implementation, 834 EDI File Implementation, Carrier and Payroll Integrations, Eligibility Maintenance Support, ACA Reporting, and Data Migration support for cross platform transitions. For more information, visit www.brokerbuildersolutions.com.
LEAWOOD, Kansas – NueSynergy, Inc., one of the nation’s fastest growing employee benefits and billing administrators in the country, is pleased to announce its preferred partnership with INSURICA, one of the largest privately-held independent agencies in the United States.
“NueSynergy continues to drive the consumer-directed health care industry forward with an employer-centric focus. As INSURICA looks to its future, it’s important for us to work with a preferred partner who shares our values and commitment to our existing and prospective clients,” said Ann Moses, Vice President and Branch Leader of INSURICA.
NueSynergy continues to achieve exceptional business results with innovative products like its COBRAcare+ administration. With COBRAcare+, NueSynergy works with INSURICA to take the extra step to check available health coverage and compare it to the employer’s COBRA benefits and premium cost. If the COBRA-eligible individual selects a coverage option other than COBRA, one of INSURICA’s licensed agents will help get them set up – and the employer no longer has an obligation to fulfill. It’s a true win-win for the individual and the employer.
“NueSynergy has concentrated on expanding our overall infrastructure as we continue to expand our nationwide presence,” said Josh Collins, president of NueSynergy. “As we continue to focus on proactive benefits solutions for employer clients, we look to trusted partners like INSURICA to build new client relationships.”
About NueSynergy
NueSynergy is known for industry-leading service, innovative technology, and excellence in providing full-service administration of consumer-driven and traditional account-based plans to employers of all sizes and sectors. Headquartered in Leawood, Kansas, NueSynergy also has locations in Arizona, Florida, Idaho, North Carolina, Virginia, Washington, and Rzeszów, Poland.
NueSynergy offers a fully integrated suite of administration services, which include Health Savings Account (HSA), Health Reimbursement Arrangement (HRA), Flexible Spending Account (FSA), Lifestyle Savings Account (LSA), and COBRAcare+ administration as well as SpouseSaver Incentive Account, Combined Billing, Direct Billing, and Specialty Solutions. For more information, visit www.NueSynergy.com.
About INSURICA
Placing over $1 billion in annual premiums for their clients, INSURICA is among the 50 largest insurance brokers in the United States and is currently the 42nd largest privately-held independent agency in the country.
Headquartered in Oklahoma City, INSURICA employs more than 700 colleagues in 35+ offices located throughout Oklahoma, Alabama, Arizona, Arkansas, California, Colorado, Florida, Mississippi, and Texas. INSURICA is constantly looking to expand their network with partners who bring additional value and expertise to the enterprise and our clients. For more information, visit www.INSURICA.com.
