Is Your Client Eligible for COBRA Continuation Coverage?

Great brokers are more than benefits coordinators for their clients. They serve as trusted advisors, extensions of employer teams that offer expert input on any number of topics—including compliance issues like COBRA continuation coverage. From what it is to how it works, consider this your COBRA refresher.    

Refresher: What Is COBRA? 

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a set of laws put into place by the Department of Labor (DOL) to protect employees from the possibility of losing health insurance coverage.  

According to COBRA, employers with a group health plan and 20 or more full-time employees must offer a continuation of group health insurance coverage to qualified beneficiaries for a limited period of time. Individuals who elect COBRA coverage must pay the entire premium plus a 2% service charge.  

Who Is a Qualified Beneficiary? 

Qualified beneficiaries are the individuals entitled to extended group health insurance under COBRA laws. For someone to be a qualified beneficiary, they must experience a qualifying event or must be a dependent of someone who has experienced a qualifying event.

Qualifying events for covered employees include:

1. Termination of employment for any reason aside from gross misconduct
2. Reduction of employment hours

Qualifying events for beneficiaries include:

1. Termination of a covered employee’s employment for any reason aside from gross misconduct
2. Reduction of employment hours for a covered employee
3. A covered employee becomes entitled to Medicare
4. Divorce/legal separation of the spouse from the covered employee
5. Death of the covered employee
6. Loss of dependent coverage (i.e., if a dependent child turns 26) 

For example: if an employed person passes away, their spouse may be eligible for continued coverage under the deceased’s employer healthcare plan due to COBRA. 

Does My Employer Client Need to Offer COBRA Continuation Coverage? 

Employers must offer COBRA coverage if they had 20 or more full-time employees for more than 50% of their business days in the previous calendar year, including full and part-time employees. 

If your employer client is required to offer COBRA continuation coverage, they must do so to employees who were: 

• Employed for at least half of the calendar year 

• Terminated for reasons unrelated to gross misconduct

For employers that must offer COBRA, the coverage can be administered by either the organization or a third party. If not properly compliant, employers could face tax penalties, statutory penalties, and other fines.

What Should Your Clients Look for in a COBRA Partner? 

COBRA is complex, time-consuming, and can incur expensive penalties for your clients if done incorrectly. When advising employers about what to look for in a COBRA administration partner, suggest the following traits: 

• Benefits Provider: Your client’s COBRA administration partner should be their benefits administration software provider. The platform should already host the necessary enrollment and eligibility data, saving time and effort. Additionally, an HRIS that manages the entire employee lifecycle will enable employers to trigger offboarding workflows that automatically generate COBRA notices to terminated employees.   
• Specialized COBRA Team: Tell your employer clients they should engage a COBRA administration professional to reduce the risk of non-compliance and increase efficiency. For example, BerniePortal offers COBRA administrative services and a team specifically trained to accommodate any relevant requirements. Our sister company Alpine is a management and service team dedicated to COBRA administration, and it integrates fully with our HRIS to make this complex benefits and compliance issue easy for brokers and employer clients. 
• A Good Track Record: Advise your clients to identify the most important COBRA administration factors for their business and to research how different administrators approach these. 

Additional Resources: 

• Brokers’ Corner Podcast—watch and subscribe to the Brokers’ Corner podcast, which dives into the topics that affect your agency and industry and identifies strategies so you can protect and grow your book of business 
• BerniePortal Brokers’ Council—a council of benefits brokers from across the country that advises BerniePortal on industry concerns, trends, and the ways technology can best support their agency and employer groups  
• BerniePortal for Brokers—leveraging technology to increase your agency valuation and support your employer groups is easier than ever with BerniePortal’s software solution, built for brokers by brokers