COBRA and State Continuation Administration

The Consolidated Omnibus Budget Reconciliation Act of 1986 created the obligation for employers with more than 50 employees to offer the opportunity to employees or their covered dependents who lose coverage under the employer's health plan to continue this coverage for a period of time at the employee's expense. The law's objective was to reduce the likelihood of employees or dependents becoming uninsured for periods of time between jobs, during leaves of absence, after a reduction in hours which disqualified the employee from eligibility for the employers' health plan, as a result of divorce, reaching majority age and so forth. The employer is required to notify both employees and covered dependents of their rights and to keep them updated as changes occur. The employer must also collect premiums based on their actual cost for the health plan for all similarly situated active employees and charge no more than a 2% surcharge to do so.

There is no doubt that these continuation rights, as since revised and clarified by the IRS and affected by the passage of new legislation including FMLA and HIPAA, have added to employee security and the fairness of the national health model we have in the United States. On the other hand, since all fully-insured plans are governed by the state (not federal) government(s), and since so-called self-funded plans are regulated by the federal government under ERISA, administering COBRA can become quite complex. There is considerable "gray area" in the law, and a variety of unusual circumstances can occur in real-life situation. There are also record-keeping requirements, state and federal penalties, and civil liabilities that have led employers of any size to almost universally outsource the administration of COBRA compliance to specialized firms. Benesyst has over 15 years of experience in the successful administration of COBRA and state-based continuation law coupled with advanced and robust processing and record-keeping systems. For more information on the law itself, go to: http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html