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| Potential COBRA Compliance Liabilities |
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The purpose of the Consolidated Omnibus Budget Reconciliation Act (COBRA) is to provide continuation of employer-sponsored group health coverage that otherwise might be terminated. COBRA health care benefits to beneficiaries may include inpatient and outpatient hospital care; physician care; surgery and other major medical benefits; prescription drugs; and health care benefits. Life insurance is not covered under COBRA. Beneficiaries are eligible for group coverage for up to 18 months.
Noncompliance begins on the date of the failure and lasts until the date when the failure is corrected or the date six months after the last day of the otherwise applicable COBRA coverage period, whichever is earlier. The maximum amount an employer can be liable for under the tax penalty is limited to the lesser of $500,000 or 10% of the preceding year's total costs of providing group health coverage. |
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| Third-Party Liabilities |
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An employer or plan administrator must provide notice to an employee within 30 days of a qualifying event. Even in cases where a written agreement exists between the employer and the third-party administrator or provider, the administrator/provider may not be liable for COBRA violations where the employer’s actions (or lack thereof) render the administrator/provider unable to carry out its responsibilities under the agreement.
For more information about COBRA compliance, click here to download a free HR compliance report. |
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 - Indefinite COBRA? |
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| On May 14th, Republican leaders from the U.S. House of Representatives announced a plan that would allow COBRA beneficiaries to preserve their coverage indefinitely. The proposal, called the American Families Agenda, would allow employees and their families to benefit from the same coverage “they have been accustomed to during a prolonged job search.” Currently, employees who leave their jobs or are fired can keep employer coverage for a maximum of 18 months. If there is a death, divorce, or marital separation, that coverage period increases to 36 months. |
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Employers that do not inform employees of their rights or violate COBRA compliance policies may face the loss of federal income tax benefits. |
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Plan administrators who are in violation of COBRA's notice requirements can be fined up to $110 per day for each qualified beneficiary who is not notified. |
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The last day of coverage is reached. |
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Premiums are not paid on time. |
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The employer no longer maintains a group health plan. |
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The COBRA beneficiary obtains health insurance with another employer group health plan that does not contain any exclusion or limitation with respect to any preexisting condition of the beneficiary. |
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A beneficiary may begin receiving Medicare benefits. |
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