Once it is established a company has to offer COBRA, does it always have to offer COBRA thereafter?
Not necessarily. Let’s take a look.
Many say credit for the origin of COBRA should be given to a grassroots organization, The Older Women’s League (OWL). This group was searching for a way to help women continue their health coverage after experiencing a divorce or the death of their spouse. Their concerns were developed through legislative efforts and eventually became a key feature in the Consolidated Omnibus Budget Reconciliation Act (COBRA), which was a federal law passed in 1985 and signed by President Ronald Regan. In general, COBRA provides for continuing group health insurance coverage for some employees and their families after a job loss or other qualifying events like divorce or death. Well done, ladies!
Which employers must offer COBRA?
In general, COBRA applies to all private-sector group health plans maintained by employers that have at least 20 employees. In other words, COBRA applies if you have 20 or more employees on more than 50 percent of its typical business days in the previous calendar year.
Let’s dive a little deeper into these two core conditions.
First, if we are counting employees, that begs the question, “who is considered an employee for the COBRA assessment?” Both full-time and part-time employees are counted to determine whether a plan is subject to COBRA. The best starting point is to figure out your total number of employees.
If you have some part-time employees, more calculations may be necessary because part-time employees are not given the same full numeric value as full-time employees (each part-time employee counts as a fraction of a full-time employee). The best recommendation is to contact your benefits advisor at ARC and work through the calculations together.
Secondly, like most companies, the employee count changes throughout the year. So what period of time are we using to establish the employee count? The authors of COBRA understood a company’s current or future employee roster is subject to change. As a result of this insight, the COBRA assessment uses a snapshot from the previous calendar year (January through December). The rationale is that last year’s employee count is a “known” number and not subject to change.
In addition, the COBRA assessment allows for an average of the previous calendar year to even out any fluctuations. If you have any questions on how to assemble your snapshot, please contact your ARC benefits advisor. We have a great tip on how to use the data you are already filing with a government agency.
Admittedly, COBRA gives us some practical guidelines on who to count, how to count, and when to count employees. Sharing this information is vitally important in knowing how to administer your plan.
Does COBRA apply to your group plan?
If you have not recently done an assessment for COBRA, the beginning of the year is a perfect time to review. If you have been with the same insurance carrier for several years, do you know if that carrier has your COBRA status registered correctly in their system?
A critical factor here is to not overlook the fact that employee counts for COBRA are based on the previous calendar year.
With the coronavirus challenges in 2020, many companies averaged a different employee count from previously consistent normal years.
Did you average fewer than 20 employees in 2020? Did you have several employees change from full-time to part-time? If so, this will impact your COBRA employee count calculation.
If you averaged fewer than 20 employees in 2020, you may not be obligated for COBRA in 2021. Please note, the COBRA obligation may not apply to the current year, however if you are an active COBRA continuant (someone has previously elected and continues to have COBRA coverage), their COBRA coverage remains in force unless otherwise terminated for permitted reasons.
You may not be completely off the hook from offering the option to continue group health insurance coverage to covered employees and their families after experiencing a qualifying event. Many states have passed comparable provisions, or mini-COBRA laws, for smaller employers (less than 20 employees). As an ARC client, you have access to licensed representatives who are available to help you sort through these kinds of requirements. Contact us today.