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.
Source: Thomson Reuters