Health insurance companies, health care professionals, politicians, academics and public health advocates all have opinions about what health care reform in America should look like. Some of these groups think that the Affordable Care Act goes too far in changing the current system. Others think that the ACA doesnt go far enough. And all have very specific suggestions on how to improve the law. But one group's whose opinion is completely missing from this conversation is employers.
Large employers have a lot of political clout. So why arent they using it to effect changes they want to see in the health care system? Is there nothing about the current health care system employers want to change? What about the elimination of the federal laws that the ACA made irrelevant but still pose a significant legal and financial risk to employers? Laws like the Consolidate Omnibus Budget Reconciliation Act, aka COBRA.
COBRA is a federal law that allows employees and their dependents to temporarily maintain their health insurance after a termination of employment or other event that results in the loss of health care coverage. The federal COBRA law makes employers with 20 or more employees responsible for informing employees of their COBRA rights as well as processing COBRA enrollments and payments.
But even if employers contract out their COBRA administration, they are likely still responsible for ensuring compliance with the federal and state COBRA statutes. COBRA compliance includes but is not limited to ensuring:
- The Summary Plan Description includes a description of COBRA rights
- That COBRA general, qualifying event and election/enrollment notices are legally compliant and provided to employees and their dependents at specific times
- That COBRA administration is properly integrated with other laws such as the Family and Medical Leave Act
- That COBRA beneficiaries have the same enrollment rights during annual open enrollment season as all other eligible employees
Employers must also ensure the proper administration of COBRA payments and termination of COBRA coverage.
Cost of noncompliance
Because of its complexity even the most diligent employers may find cracks in their COBRA administration program that may lead to lawsuits. For example, many employers do not know that their employee assistance program is subject to COBRA if it provides medical care benefits. Consequently, COBRA lawsuits are not uncommon and can add up to tens of thousands of dollars or more.
There are also significant penalties imposed for COBRA noncompliance. Primary penalties include:
- $110 per violation, per day, per individual notice penalty (if the violation involves a family of three, the penalty is $300 per day)
- $100 per violation, per day, per individual nondeductible excise tax
- Attorney fees and court costs
- Monetary awards
- Medical costs
There are several reasons employers arent lobbying to repeal COBRA. Many might be in wait-and-see mode, waiting to see how the 2014 and 2016 state and national elections turn out and if it will result in changes to the ACA. Others may not know their exposure. Human resource department heads may not inform top management of the financial risks inherent in COBRA. Or, out of a desire for self-preservation, they may not want to eliminate a major job function. And still others may be focusing elsewhere. Just over 10 years ago, employers did not see the value in workplace wellness programs because vendors could not provide conclusive return on investment data. Today employers are broadening their wellness program offerings in an effort to decrease health care costs.
In the U.S. it is not a stretch to say what large employers want, large employers get. And most employers, large or small, usually want to minimize expenses and financial risks. So its confusing to hear employers complain about how the ACA increases their health care costs while ignoring ways to offset these costs by lobbying for a repeal of COBRA.
Not only are the penalties for COBRA noncompliance large, repealing COBRA reduces the cost of administering this complex and time-consuming law. Employers can lobby for the repeal of COBRA and a change to the ACA to allow retroactive enrollments. Chances are they will get what they want.
Denise Perkins is founder of the Washington D.C.-based educational website BenefitsAll. She has been a benefits manager since 1997.
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