While it may be hard to fathom, fairly often we hear stories that companies who are not COBRA eligible have told their carrier that they are. It may be because they didn’t understand how to count employees correctly, or perhaps they used to be eligible and now they are no longer. You might think, “what’s the harm?”, aren’t employees getting more options if they terminate employment? Isn’t that a good thing? Well, the carriers may not see it that way and it can be costly to the employer.
Consider this scenario:
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- Your company was previously COBRA eligible but now you’re not.
- Unsure of whether the company is now COBRA eligible, you tell the medical insurance company you are a COBRA eligible employer, then,
- You send a COBRA notice to a former employee and they accept and enroll in COBRA, then
- That former employee has a big fat expensive surgery, then
- The insurance company wants to find a way to avoid paying the big fat expensive claims and requests an audit of your company and finds that you are in fact NOT a COBRA eligible employer, then
- Oops, you get to pay the big fat expensive medical bills out of corporate pockets.
Get the count right
If your company is on the bubble or bounces up and down between 20 eligible employees, it’s extra important to know how to calculate if you are in fact COBRA eligible.
Here’s a refresher on how to make the determination. Look back at the prior calendar year (note: this might be different from your benefits plan year) to determine if you had 20 or more employees for 50% or more of the prior calendar year (for more info, we wrote an article on this topic several years ago and we also have this handy-dandy count calculator). Once you have run the numbers, if the answer is that, yes, you had more than 20 eligible employees for more than 50% of the previous calendar year, you ARE a COBRA eligible employer for the entire following calendar year.
If the answer is no, you did not reach the threshold of 20 eligible employees, (especially if you were COBRA eligible in the prior year), it is your responsibility to tell your insurance company that starting January 1, your company is NOT a COBRA eligible employer for the coming calendar year.
If you have recently become non-COBRA eligible, it’s also a good idea to send a memo to all your benefit-enrolled employees that, for this calendar year, they will NOT receive a COBRA notice if they terminate employment because you are NOT a COBRA eligible employer. That will counter the Initial Notice you sent them last year telling them that you were a COBRA eligible employer.
COBRA is tricky business (that’s why we’re in business). So, if you are unsure of your count, we can help you make the determination. It’s important to get it right so you don’t end up paying for big fat expensive surgeries when your carrier won’t pay.