Is It Better to Be Your Own COBRA Administrator?

cobra administrator help avoid cobra pitfalls in house administration

Whether you have a COBRA administrator or not, the fact remains that COBRA administration is complicated.  There’s knowing when COBRA applies, understanding the nuances of additional state-specific (or “mini-COBRA”) laws, keeping track of long coverage periods and other timelines, and finally, choosing whether to be your own COBRA administrator or work with a third party.

Currently trying to determine what might be best for your company? It might be helpful to start with understanding some of the main risks of tackling your own COBRA administration.

Thinking your group health plan is not subject to COBRA, or that you don’t have a group health plan

Group health plans refer to a host of items, including:

  • Medical
  • Dental
  • Vision
  • FSAs
  • HRAs
  • Employee Assistance Programs (EAP)

In some instances, COBRA wellness plans also fall under the category of group health plans, but only if they are considered a medical plan.

All of these are COBRA-eligible benefits that need to be extended to qualified beneficiaries (QBs) if they experience a qualifying event. If you have more than twenty employees and you offer any of these benefits, you will need to offer COBRA coverage to qualified beneficiaries. 

Forgetting about state COBRA law 

When people refer to COBRA, they are probably thinking of federal COBRA. However, there is also state COBRA law which can modify certain aspects such as: 

  • cost
  • the way COBRA is being administrated by the insurance carrier
  • duration of the COBRA coverage

State law preempts federal law and changes more frequently. Even if you’re familiar with federal COBRA laws, ignoring these mini-COBRA laws may get you in trouble. 

Not sending required notices or providing inaccurate/insufficient information in the notices 

When you’re working in-house, you may not realize until after it becomes an issue that your organization didn’t have the most up to date version of an election notice and initial rights notice. (We discuss types of notices more below).

Check out the Department of Labor’s website to make sure you have the current copies of these notices.  If you’re using a third-party administrator, they’re going to be familiar and current with what these notices and their changes look like. 

There are seven other pitfalls of being your own COBRA administrator. Learn how to avoid them all in our guide.

Download BRI's guide to COBRA administration

What can a COBRA administrator help you with?

Accurate Notices

Not including the correct information in your COBRA notices and even forgetting to send notices entirely are common pitfalls when doing in house COBRA administration.

There are at least four different types of notices which are unique in both intent and content that get sent when it comes to basic COBRA coverage:

  • Initial General Rights Notice
  • Election Notice
  • Notice of Open Enrollment
  • Termination Notice

In just the election notice alone, you need to include exactly what benefits are available to enroll in, what the rates are, time frames, grace periods, and more!

Leaving out crucial information in the notices, or failure to send them within the required timeframe entirely may result in costly daily fines!

Coverage and Compliance

There are plenty of ways to make mistakes when it comes to COBRA coverage, and can include:

  • Not offering the right kind of coverage
  • Misunderstanding when qualifying events occur
  • Not offering coverage for enough length of time
  • Forgetting about termination dates

Recognizing and being diligent about tracking basic COBRA coverage timelines for several employees alone can be overwhelming. On top of that, the need to be familiar with state-specific COBRA laws and how COBRA coverage relates to Medicare throws additional layers of compliance complexity into the mix. There are so many moving parts and staying on top of compliance can be tricky.

Correct Calculations 

COBRA coverage rates can change. If a participant isn’t notified, is short in their premium payment, and doesn’t make up that difference within the thirty-day grace period, their coverage could be terminated.

Choosing the right COBRA Administrator

Administering COBRA benefits is naturally complicated, involving many different moving targets that require meticulous timing and accuracy. From determining qualifying beneficiaries and events to mailing coverage notices and retaining proof of mail notification, all this information needs to be tracked and maintained for future reference.

Not every company or benefits provider can make COBRA a priority. The overriding reason you should partner with an outside COBRA administrator is to take all the pressure off your company and not have to worry about intricate and ever-changing compliance regulations. Learn more.