COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It’s a key health insurance option for American workers and their families. It allows people to keep their employer-sponsored health coverage in certain situations. They can keep it if they lose their job, have reduced hours, if the employee dies, or if their marital status changes. This can provide comfort during difficult times.
Third-party administrators must keep up with federal and state COBRA rules. This ensures they follow all regulatory updates. These changes impact COBRA administration solutions, helping both administrators and employers stay compliant.
Explore compliance needs, tech trends, and best practices for admins and employers in 2025.
Evolving Regulatory Landscape
Federal COBRA laws have been in effect since Congress passed legislation in 1984. Over the next four decades, COBRA regulations have been updated periodically, and forty-four states have since enacted “mini-COBRA” laws for continuation coverage.
As compliance experts, TPAs are critical in helping employers navigate COBRA and must stay abreast of changes from Congress, the Department of Labor (DOL), and state legislatures.
Common triggers for compliance audits include failure to send election notices on time, incorrect premium calculations or collection errors, and a lack of proper documentation for COBRA elections and payments.
If a benefits plan audit uncovers compliance violations, the penalties can add up very quickly. ERISA violations can cost up to $110 per day, and excise tax penalties can be levied at $200 per day. Plus, TPAs and employers could be subject to civil lawsuits and other legal fees, not to mention the potential for a damaged reputation.
Key Compliance Reminders
Here is a summary of key federal COBRA requirements, though it’s not exhaustive. Note that states with “mini-COBRA” laws may have additional requirements.
- Group health plans must give participants specific notices that explain their COBRA rights.
- When a qualifying event occurs, the employer must notify the plan within 30 days.
- The plan must notify qualified beneficiaries about the election within 14 days of a qualifying event.
- Continuation coverage must be available for at least 18 months.
- Qualified beneficiaries have 60 days to choose COBRA coverage. This period begins when they get the election notice.
The full list of COBRA requirements can be found on the DOL website.
How TPAs Can Stay Compliant
TPAs take the lead in COBRA compliance and administration. To meet the needs of employers and participants, they must stay up-to-date through ongoing education. This includes registering for legislative alerts, networking with industry experts, and participating in webinars – some of which are recorded for later access.
Using a COBRA automation solution can help simplify administrative tasks and reduce the compliance burden.
Shifting Toward Digital COBRA Administration
Moving to a digital-first solution for TPAs, employers, and participants is critical in enhancing efficiency, automating notifications and recordkeeping, and streamlining enrollment. Paper-based processes create compliance risks and slow down participant enrollment.
A secure, user-friendly platform, like DataPath COBRA, can alleviate a lot of compliance headaches. Some solutions use AI-driven automation to reduce manual processing and human error.
Technology Trends for 2025
- Automated Notifications: Compliant COBRA administration needs attention to detail and strict deadline management. Automated notifications take away the hassle of manual tracking, ensuring no alerts are missed.
- Online Enrollment Portals: Qualified beneficiaries have 60 days to decide, but many want to enroll sooner. Online portals make enrollment easier, allowing participants to manage their COBRA benefits online.
- AI and Chatbots: Many people have questions about continuation coverage during stressful times. AI chatbots can answer FAQs and eligibility queries, letting your team focus on other important compliance tasks.
Elevating the Participant Experience and Engagement
A digital-first approach to COBRA administration can also elevate the participant experience. COBRA beneficiaries may struggle with complex language, endless paperwork, and clunky payment processes.
Trends in Participant Engagement
- Clearer Communication: Simple language and clear explanations in notices help everyone understand their tasks. This keeps participants from feeling confused by big words and jargon.
- Mobile Access: Today, people want to handle their COBRA benefits on their smartphones. A benefits platform with a mobile app allows them to make payments and manage plans easily.
- Payment Flexibility: Some like checks, but many prefer secure and flexible payment options. By offering ACH, credit, and debit card payments, beneficiaries can choose the method with which they are most comfortable.
How TPAs Can Improve Engagement
Participants may have many questions about what COBRA means for them and their families, such as election deadlines and coverage options. Providing easy-to-understand educational resources and 24/7 customer support through live chat or AI chatbots enables beneficiaries to find answers to their COBRA-related questions.
They may also need reminders about payments and due dates. Implementing automated reminder systems for premium payments and deadlines can help them stay on track and avoid accidentally forfeiting coverage.
Alternative Coverage Options for Employers and Employees
Employers and employees have more healthcare coverage options than ever.
Employers can provide different choices instead of regular group health plans. You can select between Individual Coverage Health Reimbursement Arrangements (ICHRA) and Qualified Small Employer Health Reimbursement Arrangements (QSEHRA). Employees can use these accounts to buy a plan on the open market. They do this with tax-advantaged funds from their employer. In these cases, the employer may not be required! to follow COBRA rules.
If employees decline COBRA coverage, they have other options to consider. One major concern with COBRA is its cost. Typically, qualified beneficiaries pay the full premium plus an additional two percent (102%). Many employers help cover plan premiums as part of their benefits package. However, if an employee wants to keep their coverage, they may need to pay the full cost themselves. On the other hand, they can explore healthcare exchanges to find and purchase plans that fit their budget and health needs.
TPAs can help employers find new options for their benefits package. They also ensure compliance with state and federal laws. TPAs can also share educational materials on employee coverage options and where to find plans.
COBRA compliance requires TPAs to be knowledgeable about the rules for continuing coverage. Staying up-to-date with the various rules and options can be challenging. A digital-first approach to COBRA administration can help reduce some compliance issues. To help your TPA firm stand out from competitors, seek ongoing education, use modern technology, and boost participation. This builds trust and demonstrates your commitment to compliant COBRA administration.
DataPath is a leading innovator in the employee benefits, financial services, and insurance sectors. Our flagship benefits platform provides a comprehensive solution for managing CDH, HSA, Well-Being, COBRA, and Billing. In addition, we offer expert BPO services, contact center solutions, and award-winning marketing services.
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