Navigating COBRA Coverage Termination: A Closer Look at Fraudulent Claims

Navigating COBRA Coverage Termination: A Closer Look at Fraudulent Claims

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:

  1. The health plan must allow the termination of active employees’ coverage for the same reason.
  2. The plan must permit the termination of COBRA coverage for cause.
  3. 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.

Source: Thomson Reuters

Navigating COBRA Coverage Termination: A Closer Look at Fraudulent Claims

Understanding Pre-Tax Medical Coverage Options During Unpaid FMLA Leave

Navigating the complexities of medical coverage during unpaid Family and Medical Leave Act (FMLA) leave can be challenging for both employees and employers. One common question that arises is whether employees can prepay their share of medical plan coverage on a pre-tax basis. The answer is yes, but it depends on the specifics of your cafeteria plan.

Prepayment Option Under FMLA

The IRS FMLA regulations permit three payment options for employees wishing to pay their share of the premiums for group health coverage during an unpaid FMLA leave. These options are prepay, pay-as-you-go, and catch-up.

Prepay allows employees to pay the contributions due during the leave before the leave commences. This option cannot be the sole option offered to employees on FMLA leave, although it may be restricted to employees on FMLA leave.

Pay-as-you-go enables the employee to pay his or her share of the cost of coverage during the leave.

Catch-up involves the employer advancing payment of the employee’s share during leave, and the employee repays the employer upon return.

Your cafeteria plan may provide one or more of these payment options, as long as the options for employees on FMLA leave are offered on terms at least as favorable as those offered to employees not on FMLA leave.

How Does Prepayment Work?

Under the prepay option, employees are given the opportunity to pay, before starting FMLA leave, the contributions that will be due during the leave period. They can voluntarily elect to reduce their final pre-leave paychecks or make special salary reduction contributions to cover their share of the premiums for all or part of the expected duration of the leave. Prepay contributions could also be made on an after-tax basis.

During the leaves, your company would pay its share of the premium in the same manner as before. When an employee’s leave ends, the employee’s previous salary reduction election would resume for the rest of the plan year unless the employee makes a change in election permitted under IRS regulations upon return from leave.

Limitations of Prepayment

If an employee’s leave straddles two plan years, only the contributions for coverage during the first plan year can be prepaid on a pre-tax basis. This is due to the cafeteria plan “no-deferred-compensation” rule that generally prohibits the use of one year’s contributions to fund benefits in a subsequent year. However, a cafeteria plan with a grace period under its premium payment component could arguably allow employees taking an FMLA leave that straddles two plan years to make pre-tax prepayments for up to 2-1/2 months of coverage during the second plan year before the leave begins.

Conclusion

Understanding the options for medical coverage during unpaid FMLA leave is crucial for both employees and employers. While prepayment is a viable option, it’s essential to consider the specifics of your cafeteria plan and the IRS regulations to ensure compliance.

Source: Thomson Reuters

Navigating COBRA Coverage Termination: A Closer Look at Fraudulent Claims

Understanding Special Enrollment Rights When Employees Lose Other Coverage

When it comes to health insurance coverage, understanding special enrollment rights is crucial. In this article, we’ll explore the scenario where an employee previously dropped group health coverage due to obtaining other coverage but subsequently loses that other coverage. Let’s dive in!

What Are Special Enrollment Rights? Special enrollment rights are provisions that allow eligible employees and their dependents to enroll in a group health plan outside of the regular enrollment period. These rights are triggered by specific life events, such as losing other health coverage.

The Scenario: Employee Drops Coverage and Subsequently Loses Other Coverage Imagine an employee who initially enrolled in their company’s group health plan but later dropped the coverage after obtaining other group health coverage through their spouse’s new employer. Now, the spouse’s employment has terminated, and both of them are losing their coverage. Does this situation trigger special enrollment rights under the plan?

HIPAA Requirements: Loss of Eligibility and Other Triggers Under the Health Insurance Portability and Accountability Act (HIPAA), group health plans must provide special enrollment opportunities in certain situations. These include:

    • Loss of Eligibility for Other Coverage: If an employee or dependent had other health coverage when enrollment was offered and declined, losing that coverage can trigger special enrollment rights.
    • Termination of Employment: Even if an employee didn’t elect COBRA coverage, they still retain their special enrollment right if they lose eligibility due to termination of employment.

    Applying Special Enrollment Rights in This Case: In our view, the employee’s circumstance qualifies for special enrollment rights. Here’s why:

      • The employee was previously offered coverage but declined it when other health coverage was in place.
      • Dropping coverage after enrollment doesn’t change the underlying reason—the existence of other coverage.

      Conclusion: Re-Entering the Plan Midyear Given the situation, the special enrollment right for loss of other coverage should apply. Both the employee and their spouse can re-enter the group health plan midyear. Employers should ensure clear communication about these rights to support their employees during critical life events.

        Remember, understanding special enrollment rights empowers employees and ensures comprehensive health coverage.

        Source: Thomson Reuters

        Navigating COBRA Coverage Termination: A Closer Look at Fraudulent Claims

        Key Actions for Plan Sponsors When Ineligible Employees Are Enrolled in a Health Plan

        As a plan sponsor of a self-insured health plan, it’s crucial to maintain accurate records and ensure that all enrolled employees meet the eligibility criteria. However, situations can arise where outdated information leads to ineligible employees being enrolled in the health plan. If you’ve discovered that employees working 25 hours per week have been enrolled based on old handbook information, while your plan documents and Summary Plan Description (SPD) correctly state a 30-hour threshold, swift and strategic action is required.

        Immediate Steps for Plan Sponsors

        Upon discovering such errors, you must act promptly to minimize complications and potential liabilities. Here are two primary options to consider:

        Allow Ineligible Employees to Remain Enrolled:
        • Fairness Consideration: Allowing employees to remain in the plan for the rest of the plan year can be seen as fair, especially if they relied on the outdated handbook information. This approach reduces the risk of employees seeking equitable relief due to miscommunication.
        • Stop-Loss Insurance Risk: Check with your stop-loss insurer before proceeding. Stop-loss coverage typically adheres to the terms in the plan document, not ancillary documents like handbooks. Without insurer approval, claims from these employees might not be covered under your stop-loss policy.
        Remove Ineligible Employees from the Plan:
        • Consistency with Plan Terms: Removing these employees aligns with the plan document and SPD, mitigating the risk of significant uncovered claims under your stop-loss policy.
        • Prospective Removal: Ensure the removal is prospective, not retroactive, to avoid the impermissible “rescission” of coverage. Retroactive removal could lead to significant legal and ethical issues.
        • Equitable Relief Risk: Be aware of the potential for employees to claim equitable relief for lost benefits due to reliance on the outdated handbook.
        Ensuring Compliance and Fair Treatment

        Consistency is key in handling such situations. Treat all similarly situated employees alike to avoid claims of discrimination under various laws. Disparate treatment can lead to claims of discrimination based on sex, race, age, or health status. Additionally, adhere to the nondiscrimination rules under Code § 105(h) for self-insured health plans.

        Discovering ineligible employees enrolled in your health plan requires careful consideration and prompt action. Whether you decide to keep the employees enrolled for the remainder of the plan year or remove them, ensure that your actions are consistent with plan terms and fair to all employees. By addressing the issue swiftly and consulting with your stop-loss insurer, you can mitigate potential risks and maintain the integrity of your health plan.

        Source: Thomson Reuters

        Navigating COBRA Coverage Termination: A Closer Look at Fraudulent Claims

        Understanding HRA Benefits After an Employee’s Death: Navigating Legal and Tax Implications

        When an employee passes away, employers often face challenging questions regarding benefits and compensation. A common question that arises is whether an employer can pay a deceased employee’s unused Health Reimbursement Arrangement (HRA) balance to the surviving spouse. This article delves into the regulations and best practices surrounding HRAs in such scenarios, ensuring compliance and clarity.

        HRAs and Their Restrictions

        Health Reimbursement Arrangements (HRAs) are designed to reimburse employees for qualifying medical expenses, as outlined in Code § 213(d). Importantly, HRAs are not allowed to disburse cash payments to employees or their beneficiaries at any time, including after the employee’s death. Any attempt to convert HRA balances into cash would disqualify the HRA for all participants, rendering all reimbursed amounts taxable—even those for legitimate medical expenses.

        The Concept of Post-Death Spend-Downs

        While direct cash payments are prohibited, HRAs can include a provision known as a post-death “spend-down.” This feature allows the remaining HRA balance to be used to cover qualifying medical expenses for the deceased employee’s surviving spouse, tax dependents, and qualifying children. Employers should check their HRA plan documents to see if this feature is included and, if not, consider amending the plan to incorporate it.

        Compliance and Nondiscrimination Rules

        Amending an HRA plan to include a post-death spend-down feature must comply with several nondiscrimination rules. These rules ensure that benefits are not skewed in favor of highly compensated individuals. Specifically, all benefits provided to highly compensated participants must also be made available to all other participants.

        Additionally, IRS Notice 2015-87 casts some uncertainty on whether family members without major medical coverage can utilize a post-death spend-down feature. Until further clarification from the IRS, a cautious approach would be to limit these reimbursements to family members who also have major medical coverage.

        Administering Post-Death Spend-Downs

        Proper administration of the post-death spend-down feature is crucial. Only qualifying medical expenses for eligible individuals should be reimbursed. Failure to adhere to this can result in all HRA reimbursements becoming taxable, not just those for ineligible expenses. Employers must also remember their obligations under COBRA. If a deceased employee’s death triggers a COBRA qualifying event, then qualified beneficiaries must be given the opportunity to continue their HRA coverage for the duration prescribed by COBRA, regardless of the presence of a post-death spend-down feature.

        Conclusion

        While it may seem compassionate to pay out a deceased employee’s unused HRA balance to their surviving spouse, doing so would jeopardize the tax-advantaged status of the HRA for all participants. Instead, employers should explore the option of a post-death spend-down feature, ensuring they comply with all relevant nondiscrimination rules and administrative guidelines. By carefully navigating these regulations, employers can support their employees’ families while maintaining the integrity of their HRA plans.

        Source: Thomson Reuters