Watch Out! Keep Your Clients From Being Bitten by COBRA
Though not originally a part of ERISA, a significant later amendment was the COBRA notice requirement. While no employer is going to mistake this COBRA for a snake, many have been bitten by it nonetheless, with penalties of up to $110 per day. That can paralyze a small business if one or more years are involved. Not every employer is subject to the COBRA notice requirements; however, those with 20 or more full time employees most likely are. Generally circumventing that by employing several part-time employees will not enable an escape from the coils of COBRA.
By law, upon termination of an employee (or another qualifying event) which triggers a loss of health insurance coverage, an employer is required to give a written notice of COBRA rights. This is the right to continue to receive health insurance benefits for at least 18 months at the expense of the covered individual. Usually the cost is 102% of the actual cost of the health insurance. This continued coverage can be critically important to many. Employers sometimes mistakenly believe that merely telling the former employee about COBRA is sufficient. Some have argued that mentioning COBRA in a release or some other document is adequate notice. See Knight v. Gen. Telecom, Inc. (N.D. Ala. Sept. 27, 2017). However, the regulations (29 CFR § 2590.606–4(b)(4)) set out in detail all of the information that must be contained in the COBRA notice, including an outline of the procedures to follow when making the election. Failure to follow these regulations is at the employer’s peril. To protect your employer clients, develop a checklist or brief summary of how to avoid the bite of COBRA and offer it to your clients as a resource.