COBRA

HRManager · January 2003

We have an ex employee who is on Cobra. He is late with his payment - we send out monthly invoices (I don't believe we are obligated to do this). He is supposed to have his check in to us by the 25th of each month. We pay our insurance on the first of each month. what are our options?

Anita · January 2003

This is how our Cobra works. The employee is notified they are eligible and they can choose to take it or not. The first payment is due within 45 days and must include previous months and current months if they wish to continue. They then must pay monthly, we don't send invoices, but they have a 30 day grace period.

I don't know if that helps, but this is explained in the cobra letter they are sent, so that it is their responsibility to continue or not.

Theresa Gegen TX · January 2003

Here is what the Department of Labor says:

Who pays for COBRA coverage?

Beneficiaries may be required to pay for COBRA coverage. The premium cannot exceed 102 percent of the cost to the plan for similarly situated individuals who have not incurred a qualifying event, including both the portion paid by employees and any portion paid by the employer before the qualifying event, plus 2 percent for administrative costs.

For qualified beneficiaries receiving the 11 month disability extension of coverage, the premium for those additional months may be increased to 150 percent of the plan's total cost of coverage.

COBRA premiums may be increased if the costs to the plan increase but generally must be fixed in advance of each 12-month premium cycle. The plan must allow you to pay premiums on a monthly basis if you ask to do so, and the plan may allow you to make payments at other intervals (weekly or quarterly).

The initial premium payment must be made within 45 days after the date of the COBRA election by the qualified beneficiary. Payment generally must cover the period of coverage from the date of COBRA election retroactive to the date of the loss of coverage due to the qualifying event. Premiums for successive periods of coverage are due on the date stated in the plan with a minimum 30-day grace period for payments. Payment is considered to be made on the date it is sent to the plan.

If premiums are not paid by the first day of the period of coverage, the plan has the option to cancel coverage until payment is received and then reinstate coverage retroactively to the beginning of the period of coverage.

If the amount of the payment made to the plan is made in error but is not significantly less than the amount due, the plan is required to notify you of the deficiency and grant a reasonable period (for this purpose, 30 days is considered reasonable) to pay the difference. The plan is not obligated to send monthly premium notices.

COBRA beneficiaries remain subject to the rules of the plan and therefore must satisfy all costs related to co-payments and deductibles, and are subject to catastrophic and other benefit limits.

So the miniumum grace period for payments is 30 days. The plan could give more than 30 days grace. Also note that the payment is deemed as made on the date it is mailed to the employer. So if the employee MAILS the payment on the 30th day (which means you won't get it for a day or two later), the payment is still timely.

Even though COBRA does not require you to send out invoices, since you have already done so for this employee, I suggest that you either continue to do so for him OR notify him in writing in easy to understand language (that you send by certified mail to make sure he gets it) that you will no longer send invoices, but he still must get his payment in by the due date and failure to do so will result in termination of coverage.

Good Luck

HRManager · January 2003

How many times can he be late and reinstated? It is a pain to administor and this employee was terminated which makes it more of a nuisance factor. He did call and say he would drop it off (8 days late) I told him that if we did not receive it my the 25th of each month, it would be terminated. Am I ok to do this?

LindaS · January 2003

Does the 25th of the month include the 30 day grace period? For example, in companies I have worked for the payment is normally due the first of the month but the employee (or ex-employee) actually has until the end of the month to get the payment in due to the grace period. The question I have is if the 8 days late includes this grace period. If it does then my thought is that you CAN terminate him from the plan but I am usually a little hesitant about jumping on completing the termination paperwork until I am sure I have given them ample time to get the payment in. If this person contacted you right away and actually dropped the payment off when they said that they would, I would not terminate them at this point but give them an opportunity to remain on the plan. If this is a pattern however I would look at things differently.

HRManager · January 2003

Thanks Linda,

This helps.

LindaS · January 2003

What I have done in these instances is send a notice to the ex employee informing them that we have not received their payment. I usually give them about two weeks to send their payment or they are terminated back to the last date of their payment. These things are all CLEARLY spelled out in this letter and the letter is sent certified so I have a receipt verifying that it was sent as well as the return receipt once they pick up the letter. Once that additional time has expired, they are terminated from the plan. I have never sent out monthly invoices since we are not required to do so.

I hope this helps.

COBRA

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