Guidelines to prepare for COBRA open enrollment

The importance of COBRA open enrollment

It’s critical to get things right when it comes to COBRA. Guidelines set by the US Department of Labor require that those offering group health plans provide continuation coverage for covered employees, former employees, spouses, former spouses, and dependent children in the event of where coverage is lost. In the COBRA world, this eligible group is known as Qualified Beneficiaries (QBs). Once enrolled in COBRA, they become COBRA participants and are entitled to change their benefits–as well as add or remove dependents during the open enrollment period. 

Businesses and HR teams need to follow the guidelines set by the Department of Labor to the letter. When not adherent, employers risk penalties with steep financial implications that could cause irreparable damage. In fact, there is a potential excise tax penalty of $100 per day, which increases to $200 per day if there is more than one affected individual (e.g., spouse, child). Plus, employers may face potential lawsuits and may be held responsible for paying for any coverage gaps which could drive that number up even further. You can view the full list of penalties and subsequent fines outlined by the IRS here.

For example, say a business doesn’t provide COBRA notices to ten employees with dependents. Given the penalty per day of $200, when applied to 10 employees, the penalty jumps to $2,000 per day and accumulates to a whopping $730,000 over a year. Plus the employer would need to cover the cost of any extra expenses each QB may have incurred during the lapse of coverage. The costs add up quickly.

Given the financial implications, COBRA is a big deal that can cause significant liabilities without proper attention. 

Given the risk, Megan Burns, Benefits Strategy Lead at Forma, and the President of Peak One Rachel Humbird sat down to discuss COBRA preparation and risk management strategies. As a takeaway, we’ve outlined guidelines you can use to prepare for COBRA open enrollment and avoid the risks of not getting things right.

How to plan for COBRA open enrollment

As a first step, consider working with a trusted COBRA vendor. Given all the specifications set by the federal government, it’s best to work with someone with expertise in the area. Partnering with a COBRA vendor can deliver a much-needed lifeline for those new to COBRA open enrollment specifications. Better yet, they can help coach you and know the right questions to ask. 

Taking the steps below will help you be prepared to ensure a smooth COBRA open enrollment rollout for COBRA participants and qualified beneficiaries.

Set the timeline and determine your COBRA Open Enrollment dates.

Give yourself plenty of time to map out plans with your COBRA vendor. It’s best to allow roughly 90-120 days to set the COBRA open enrollment schedule–as well as prepare and finalize the open enrollment COBRA notices. Many opt to coincide COBRA open enrollment with your active employee’s open enrollment, although not required. You can stagger your COBRA open enrollment dates as well. No matter the decision, be sure to check in with your COBRA vendor for their timeframe as well so you can finalize dates and deliver on your fiduciary responsibilities. Most employers allow for COBRA open enrollment during a 2-week period, 30-60 days prior to the plan's effective date. 

Determine if COBRA Open Enrollment will be active or passive. 

Just like with your company's open enrollment, COBRA open enrollment can be active or passive. If active, this means all participants must actively enroll in coverage, otherwise they will lose coverage come the new plan year. If passive, prior elections will roll over if no action is taken by the participant during open enrollment. If you are administering for a passive enrollment, don’t forget to map your carriers if you have a carrier or program changes. Mapping will place participants into similar plans they were previously enrolled in since those plans will no longer be offered if they do not make an active election to change. 

Set up your COBRA-eligible plans and rates with your COBRA vendor if applicable

Review all the COBRA-eligible plans being offered during your setup. Pay special attention to programs commonly overlooked like your stand-alone Employee Assistance Program* (EAP), Health Reimbursement Arrangement (HRA), and Flexible Spending Account FSA. Provide your updated rates to your COBRA vendor. Make sure the total cost is provided or entered correctly on your COBRA portal by plan. 

* Generally only  EAP standalone plans are required with COBRA. Embedded EAPs (through your Life or Disability carrier for example) are generally not COBRA eligible. A best practice is to check in with your EAP provider to confirm. 

Assemble open enrollment materials.

It’s important to communicate the right information. Below is a checklist of details to include in your COBRA open enrollment packet so that your company is compliant and those eligible for COBRA get the information they need.

• Overview of changes (if applicable)
• Actions to take during open enrollment
• New rate information
• Benefit summaries and/or plan comparisons
• Annual notices and plan documents or include in packets.

Finalize the distribution details and send out materials.

Confirm who will own sending out the required notices. If your COBRA vendor is sending these on your behalf, confirm they have access to all eligible Qualified Beneficiaries and COBRA participants. Generally, they receive this information via a file feed. If you’re switching COBRA vendors, make sure they have all prior COBRA data and up-to-date participant details. You will also want to confirm the date the COBRA notices are distributed by the vendor to ensure the communications were sent out. 

Confirm annually how new elections will get to the carriers.

If working with a COBRA vendor confirm how they will communicate elections to carriers. Generally, they can communicate elections via file feed or email. Check to make sure either the files are set up or that they have the right contact on record to communicate these changes.

If your COBRA vendor and carrier utilize a file feed to communicate elections,  make sure any new plans are included on that file spec. This is an area commonly overlooked that delays enrollment and access to care for COBRA participants. 

Account for any remittance changes. 

You may need to change from remitting to the employer to carrier or vice versa. Confirm the setup with your COBRA vendor and carriers. Confirm if there are any new contacts or emails that need to be updated for all system communications.

Get help with COBRA open enrollment 

Taking the steps covered can be incredibly helpful in planning for COBRA open enrollment and partnering with your COBRA vendor. Having everything buttoned up is huge. However, given the cyclical nature of COBRA, open enrollment isn’t the only time participants enroll. We can help.

The experienced team at Forma has helped customers navigate COBRA open enrollment in partnership with Peak One. When in need of support, schedule a consultation with one of our experts.

Download Forma's COBRA open enrollment checklist to make sure you’re meeting your milestones with COBRA open enrollment planning.

Watch the discussion for more details on how to prepare for COBRA open enrollment with Forma and Peak One.