Administering COBRA seems like it should be an easy, clear cut process and not terribly time consuming. However, there are several common mistakes that are made when administering COBRA that can cost an employer a substantial amount of money. If specific guidelines are not followed, the penalties and taxes for non-compliance exceed $100 per day per beneficiary! You could also become eligible for past and future medical claims for failure to properly provide coverage, so be sure you know the rules!

Are you making any of these five common COBRA mistakes? 

1.  Failing to include the right benefits under COBRA? 

Medical, prescription, dental, vision, hearing plans, Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), and even some EAP plans are all eligible benefits under COBRA. 

2.  Not offering COBRA at all?  

Under ERISA, COBRA must be offered by ALL employers with 20 or more employees, with the exception only of churches and the federal government.  When a qualifying event causes a covered employee to lose coverage due to a reduction in the number of hours worked or the termination of employment for ANY reason other than gross misconduct, COBRA must be offered. 

3.  Not providing all required notices?

• Model General (or Initial) Notice – Revised in May 2014 to include coverage alternatives, in lieu of COBRA, that may be available through the ACA Marketplace 

Provides general information regarding COBRA and the plan procedures

Must be given to ALL new hires AND their qualified beneficiaries within 90 days of the benefits effective date – we recommend certified mail to the home addressed to all beneficiaries as well, rather than delivering to the employee alone

Must include plan name, address and phone number of a contact person for plan information

• COBRA Election Notice

Provides information for participants and beneficiaries about the rights and obligations under COBRA and specific qualifying events

Must contain contact information, description of the COBRA coverage, premium amount for each participant, procedure for making payment, how to elect or waive the coverage, the duration of the coverage and how coverage may be extended, etc.  

Notice must be sent to those with a qualifying event within 14 days – again, we recommend certified mail to the home addressed to all beneficiaries as well

• Notice of Unavailability of Group Health Coverage and Early Termination Notice –

Notice of unavailability must be provided within 14 days if COBRA continuation, or an extension of continuation, is denied 

An Early Termination Notice must be provided if for example the premiums are not paid on a timely basis, or if the employer drops the group health plan altogether

4.  Administering premium collection incorrectly?

• Qualified beneficiaries are allowed up to 60 days to choose to elect COBRA, and have another 45 days after the election to pay the initial premium
• The premium must not exceed 102% of regular premiums, or 150% during the additional 11 months of a disability extension
• There is a grace period of 30 days from the due date for each payment, which should be administered based on the postmark date of the premium if mailed, not the date of receipt by the employer
• If premium payment is made but is incorrect, the plan must notify the beneficiary of the deficiency and give ANOTHER 30 day grace period to pay the difference
• Premiums must be actuarially determined.  For fully insured plans, this is no problem as the actuaries at the insurance company have determined your premiums. But for self funded plans, or especially Health Reimbursement Arrangements, you may need an actuary to determine the right premium to charge your COBRA continuants. Fortunately Fall River clients have an actuary at their disposal – our CEO, Kristen Russell.
• A premium change notice must be sent within 30 days

5.  Not Maintaining Proper Documentation?

• Tracking who's eligible and who's not, who has received which notices, when the notices were sent, whether premiums are paid accurately and on time, and so on 

• Failure to prove delivery of the basic COBRA documentation by the stated deadlines could lead to taxes and penalties if audited

Stressed out yet?  Let us help.  We can review your COBRA processes with you to ensure you are in compliance, or help you outsource this cumbersome task.  Just give us a call at 303.369.3200 or This email address is being protected from spambots. You need JavaScript enabled to view it.