COBRA Legalities

Leslie

Okay all you COBRA gurus out there, check this out. My SO started his own company and several people from the place he worked for came with him. Of those, four opted for COBRA - my SO pays for half and the employee pays for the other half. Two of the employees don't have checking accounts, so my SO writes a personal check for the three of them, and his assistant writes one for herself and mails them together. Today she receives a non-certified letter addressed to the company, not the individuals, that states the old company is "within our legal rights to charge an extra 2% administration fee." Are they?

Then further down in the letter it states they want the checks "with a sheet of paper attached showing coverage and fees separated. In addition for any check that is paying for more than one employee's coverage, please specify the amounts that are to be applied to each individual person. If there is not a breakdown showing this, we cannot guarantee payments will be applied correctly and coverage may lapse as a result." Now, seems to me they want to charge an administration fee but then have the person paying it do all the administration. It sounds fishy to me. What do you all say?

irenesmsaclaims

Yes, the old company has the right to charge the 2% administrative fee, by law, even though the new company is doing all of these things for the people. They are the COBRA-offering entity.

Since they are probably accustomed to receiving a check from one COBRA participant for a certain amount at a time, they may be getting confused by a check for more than one person, thus the breakdown request. I would comply, so that there are no potential "doctor's office" (or hospital admission) mishaps.

AJ SPHR

I wholeheartedly agree with the other poster. We always charge the 2% admin fee, which is our right under the COBRA legislation. And I also agree that the combined check representing several participants may be confusing to them and many systems are automated so it might be difficult to process without separate checks. It is not at all fishy, and in fact is pretty common.

Leslie

But for all the old company knows, these four employees may not still be working for the same place. Aren't they obligated by law to contact the individuals?

I understand the 2 percent, and perhaps breaking out the one check for three people (so much for employee one, so much for employee two, so much for employee three). However, that's not what they want. They want it broke out like this individually for the four employees:

Emp 1
$ medical
$ dental
$ fee
__________

$ total

Emp 2
$ medical
$ dental
$ fee
__________

$ total

etc.

No one minds paying the 2% - it just seems that they want the extra money AND have my SO's assistant do the administration.

irenesmsaclaims

The prior employer has to contact the COBRA people at their last known address. If the employees provide a newer address to do the COBRA business, it would seem reasonable that the prior employer would use it. Again, to avoid any lapses of coverage, I would comply. This is probably about the way they're set up.