Echelon Group

Figurative speaking, I have met a few people that needed someone to buy them a heart because their attitudes and actions didn’t give any indication that they had one. People that truly have a medical need for a new heart are able to get one in our world of modern medicine. Heart transplants make getting a new heart possible. The combination of medical capability and insurance make heart transplants and other amazing procedures available to those that wouldn’t have the money to pay for it. Insurance is the link that makes good health care available to most individuals.

To protect individual’s right to keep their insurance benefits COBRA regulations require employers to allow employees to extend insurance coverage past the end of their employment. Failure to correctly comply with COBRA can be very expensive to an employer. There are two potential high costs to the failure to correctly comply or administrate COBRA benefits.

1. Financial penalties the government assesses to enforce compliance.
2. The potential to “buying a heart” if COBRA isn’t administrated correctly.

The greater risk comes from attempting to comply with COBRA but not doing it correctly. To date, I have yet to find an employer doing COBRA administration themselves internally that is doing it correctly. Thinking they have COBRA handled they expose themselves to “buying a heart.” Financial penalties for non-compliance can be severe, as addressed in “A Dollar Saved – Thousands Spent.”  But that isn’t the biggest risk to an employer.

The greater risk is having a terminated employee of dependent that didn’t get proper notification of their COBRA rights come up with a major medical expense. COBRA provides that the individual has 60 days to elect continuation of their medical benefits. If the COBRA guidelines for notification are not followed then their 60 days doesn’t start. If that individual then comes down with a condition requiring expensive medical care seeks coverage the employer may be on the hook to pay for the expenses. If the normal period has passed to extend the coverage the insurance carrier will deny adding the individual to the insurance plan. Then the employer can end up being liable for the medical expenses.

All this risk can be minimized by administering COBRA correctly. Reviewing your COBRA practices and outsourcing COBRA administration to a company that specializes is the best approach. Use the three questions in “Playing with Snakes” to start. You don’t want to buy a heart.

Growing up my parents used a common sense approach regarding snakes. They taught us recognition and respect. Growing up we saw four kinds of snakes fairly regularly. The garter snake, bull snake, water snake and rattle snake. I learned the hard way that not respecting snakes comes with a price.

Today the scariest snake I deal with is COBRA. The COBRA in business isn’t really a snake, but an acronym. An acronym for the legislation that provides employees and their rights to continue employer sponsored benefits when they no longer work for the employer. It always surprises me the number of employers that are playing with this dangerous snake without recognizing the risk.

The key to COBRA is recognition and respect. Recognizing when COBRA applies and what benefits it covers. Respecting how complex the guidelines are and the substantial costs that can be incurred if the guidelines are not followed.

Employers need to answer three primary questions to determine proper recognition and respect for COBRA:
1. Does COBRA apply to us?
2. What does COBRA require us to do?
3. Do we administer COBRA internally or outsource it?

Not knowing the answers to the above questions is like playing with snakes. You may never get bit. But, if you do the consequences range from painful to fatal. See “Who wants to buy a heart?”