Occasionally a client or broker asks us to provide COBRA administration for stand-alone products while a trust will provide COBRA administration for the trust product. While, clearly, we have a bias, this article is intended to look at the pro’s and con’s of doing it both ways.
Here’s the scenario: A client has a group medical plan with ABC Trust administered by XYZ Administrator for “free.” The client also has stand-alone dental and vision plans and a Health Flexible Spending Account. The client/broker asks SBA to provide COBRA administration for the dental, vision and Health FSA while XYZ Administrator provides COBRA administration for the medical plan.
Keep in mind that, in this scenario, the cash outlay to the client is the same as if SBA were to handle all the programs. We will already be charging a COBRA fee to handle the stand-alone benefits. So, from a financial perspective, the scales are balanced.
OK. Fast forward and an employee experiences a qualifying event. COBRA notices need to go out. In this scenario, XYZ Administrator sends a COBRA notice for the medical plan and Sound Benefit Administration sends a COBRA notice for the dental, vision, and Health FSA.
The impact to the participant:
Let’s assume that the participants wants to sign up on COBRA for all benefits. They will need to:
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- Complete the COBRA election form provided by XYZ Administrator and mail it with a check to enroll in the medical plan.
- Complete the COBRA election form provided by SBA and mail it with a check to enroll in the dental, vision and Health FSA.
Then each month, the COBRA participant makes out two checks and sends them to two different locations. If there is a payment or claim problem with a benefit, they must call the correct administrator to resolve the problem.
From the administrative end:
XYZ Administrator:
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- Monthly bills the COBRA participant directly for the medical plan COBRA premiums.
- At enrollment, sends open enrollment materials directly to the COBRA participant at renewal assuming the client renewed with the same trust.
Sound Benefit Administration:
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- Puts the COBRA participant back onto the employer’s invoice for vision, dental & FSA COBRA administration.
- Monthly remits payment of premiums to the employer for reimbursement.
- At enrollment, sends open enrollment materials to the COBRA participant for dental, vision (not eligible to renew the Health FSA). If the client changes carriers, SBA takes care of getting the COBRA participant on the new plan(s).
What if SBA was asked to provide COBRA administration for all benefits and the client said no to the “free” COBRA administration from XYZ Administrator?
Certainly, it’s less confusing for the COBRA participant with one election notice and one payment each month. Additionally:
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- Open enrollment communication with the COBRA participant is less confusing with one packet that outlines all renewal options.
- Having only SBA as an administrator means there is only one place to call to get all payment and claim problems resolved for all benefits.
- There is one place for the client to track all COBRA participants and which benefits they are enrolled in.
- Lastly, COBRA participants enrolled only in the medical trust are not forgotten if the client moves to another carrier. (Oh, how often have we heard that XYZ Administrator never communicated to the client that they had someone on COBRA and a month later the COBRA participant calls the ex-employer asking why he can’t fill a prescription? Why? His data was excluded from the census and the new carrier will add him but because of his age, they’ve decided to re-rate the group because they were not told about him when they quoted the rates. *sigh*)
So, given all this, why wouldn’t a client just have SBA administer everything? Well, there is one downside of having us handle all plans including the trust plan: COBRA participants are listed on the group’s invoice, and they must pay the bill each month in advance of getting the COBRA premium reimbursed.
Is that one “con” enough to tip the scales? Especially since there is one huge upside to having SBA administer COBRA for all COBRA eligible benefits: You are not going to pay anything more to have us administer all benefits and ya’ll know we have excellent customer service bar none!
You’re welcome for this helpful bit of free advice.