Let’s talk about COBRA and open enrollment
Published on September 1st, 2020
I don’t mean to put a damper on the last days of summer, but we need to talk about group health plan open enrollment.
Up to 80% of employers start their benefit plan year on January 1, which means that now (September) through the end of the year employers, brokers and insurance carriers will evaluate and negotiate benefit plan design and rates to offer the most affordable insurance with adequate services.
COBRA open enrollment
Although open enrollment occurs annually and is largely the same process each time, one of the most confusing steps for employers is handling individuals or families enrolled on COBRA or pending COBRA enrollment. Under ERISA, those on COBRA insurance must have the same open enrollment rights as active employees. That means that if employers offer active employees a new medical plan, they must also offer the same plan to COBRA-eligible individuals. The same applies to dropping plans or changing carriers. During open enrollment, premiums and employee costs may change. This means that COBRA premiums will change as well. (Reminder: A COBRA premium is 100% of the premium plus 2%.)
This year’s open enrollment has the potential to be even more complicated as it relates to COBRA, given the ongoing pandemic and economic recession. Below I discuss what employers and administrators should anticipate in this unique open enrollment season in order to get out in front of any potential issues as soon as possible.
Challenges for employers
The pandemic and recession present new challenges for employers this year related to open enrollment and COBRA insurance.
- The risk pool and associated new premiums could result in astronomical rate increases for employees as well as COBRA participants, a challenging message for employers to deliver.
- The high level of unemployment means a larger number of families on COBRA, leading to greater administrative and communication challenges.
- Employee Benefits Security Administration (EBSA)/Department of Labor (DOL)/Health and Human Services (HHS) guidance to pause all enrollment and payment deadlines for COBRA will potentially cause significant confusion as the current plan year rolls into the new year.
Challenges for administrators
COBRA-eligible individuals must be promptly notified of the changes and options that are available. Employers often rely on their COBRA administrator to handle this, presenting the following challenges:
- The effort to notify each Qualified Beneficiary (QB) becomes a multi-step process that could last well into the new year because there are continually new COBRA-eligible individuals and COBRA-pending individuals. (Individuals have 60 days to elect and 45 days to pay.)
- Furthermore, if the loss of coverage occurred in the current year, those QBs need to make an election for this year and also one for next year. COBRA administration software may not handle this coordination of elections gracefully, requiring manual tracking.
- The EBSA/HHS/DOL paused enrollment and payment deadlines throws a wrench into the mix. Consider a family who has not yet decided about COBRA coverage they were eligible for beginning in March 2020. If in February of 2021 (presuming the COVID-19 “Outbreak Period” is still in force) they elect COBRA, the family now owes premiums from March through December of 2020, as well as a new open enrollment election and new premium payments starting January 1, 2021. This could result the election of two different plans, carriers or coverage levels.
- Consider the possibility of a federal subsidy for COBRA. Those families could potentially elect now for their current year coverage and then go through open enrollment as usual. The most unusual step from the norm would be the longer-than-normal retroactive reinstatement of coverage.
A proactive approach to COBRA enrollment
Employers and administrators alike can begin taking some definitive steps before open enrollment season is in full swing – and before potentially increased premiums and carrier changes occur. Doing so will help ease the burden of families who’ve been in an insurance coverage holding pattern for several months now.
- Project plan for open enrollment fulfillment, coordination and any costs or fees.
- Communicate early and often about plan or carrier changes.
- Begin steps for any necessary new file specification modifications.
- Identify your participants and what you’ll need to send to them.
Having the right administration platform can also make a world of difference in the open enrollment process – as well as the ongoing administration of COBRA and direct billing. Learn more about the Alegeus COBRA solution, the only 100% cloud-based, fully integrated COBRA administration and consumer-directed platform.
About the Author: Kris Saunders has worked in the COBRA space for more than 30 years, including a role as vice president of operations for WageWorks during ten of those years, and as a consumer solutions engineer for Alegeus. Kris is certified as a CFCI, CAS and SPHR.