2025 Employers Guide to COBRA
As we move into 2025, it’s important for employers to know about the Consolidated Omnibus Budget Reconciliation Act (COBRA). This law gives employees and their families the chance to keep their health insurance after certain life events. This guide will explain what COBRA is, what employers need to do, and how to make the process easier for everyone.
What is COBRA?
COBRA is a federal law that lets employees keep their group health insurance for a limited time after specific events. It applies to businesses with 20 or more employees and covers group health plans from private companies and local or state governments.
COBRA is there for employees and their families after they go through a qualifying event, like:
- Losing their job (unless they were fired for bad behavior)
- Having their work hours cut
- Getting divorced
- The death of the employee
- Losing dependent status (like a child turning 26)
Why is COBRA Important?
COBRA is really important because it helps people keep their health insurance during tough times. Losing your job or going through a big life change can be stressful, and having health insurance can help ease some of that worry. COBRA gives people the time they need to find new jobs or other insurance options.
What Do Employers Need to Do?
If you’re an employer, it’s crucial to understand your responsibilities under COBRA to stay compliant and avoid fines. Here are the main things you need to know:
1. Notify Employees of Their COBRA Rights
When an employee becomes eligible for COBRA, you must inform them. This means sending a notice within 14 days of a qualifying event. The notice should include:
- Information about their right to continue health coverage
- How long they can keep the coverage
- How much it will cost them
- Instructions on how to enroll in COBRA coverage
2. Provide Coverage Options
If an employee chooses COBRA, you need to offer the same health benefits they had when they were employed. This means they should still have access to medical, dental, and vision insurance if those were part of their original plan.
3. Handle COBRA Premium Payments
You can charge employees up to 102% of the premium for COBRA coverage. This includes the total cost of the coverage plus a 2% fee for administration. Make sure to communicate clearly about when payments are due and how employees can pay.
4. Keep Records
It’s essential to keep records of all COBRA notifications, elections, and payments. Good record-keeping helps with compliance and can be useful if there are any disputes later.
5. Understand Reporting Requirements
If your business is required to file Form 5500, you must report COBRA enrollment and compliance. This form gives the Department of Labor (DOL) information about your employee benefits plan, including COBRA.
How Long Does COBRA Coverage Last?
COBRA coverage doesn’t last forever. The duration of coverage depends on the qualifying event:
18 months: For employees who lose their jobs or have their hours reduced.
29 months: If a person is disabled (this must be determined within the first 60 days of COBRA coverage).
36 months: For dependents who lose coverage due to the employee’s death, divorce, or legal separation.
Employers should notify former employees when their COBRA coverage is about to end, so they have time to find other options.
Best Practices for Employers
To stay compliant and help employees during transitions, consider these best practices:
1. Create a COBRA Compliance Plan
Make a clear plan that outlines how you will notify employees, manage elections, and handle payments. Assign specific roles to ensure everyone knows what they are responsible for.
2. Use a Third-Party Administrator (TPA)
Think about hiring a TPA that specializes in COBRA administration. They can help manage notifications, elections, and payments, making the process easier for your HR team.
3. Communicate Clearly with Employees
Make sure your communication about COBRA coverage is simple and easy to understand. Provide employees with written materials that explain their rights and responsibilities. Designate HR representatives who can help answer questions.
4. Stay Updated on Changes in the Law
Keep an eye on any changes in COBRA regulations, as laws can change. Regularly review your policies and practices to ensure they are up-to-date.
5. Provide Resources for Alternative Coverage
Help employees transition from COBRA to other health insurance options. Share information about state health insurance marketplaces, Medicaid, or private insurance plans they can consider.
Common Misconceptions about COBRA
Let’s clear up some common misunderstandings about COBRA:
Myth 1: COBRA is Free: COBRA allows employees to keep their health coverage, but they have to pay for it. The cost may be higher than what they paid while employed.
Myth 2: Employers Can Deny COBRA Coverage: Employers must offer COBRA coverage unless the employee was fired for serious misconduct.
Myth 3: COBRA Coverage is Indefinite: COBRA coverage is temporary and has set time limits based on the qualifying event.
Final Notes
Understanding COBRA is essential for employers as we head into 2025. By meeting your obligations to notify employees, provide coverage, and keep accurate records, you can help ensure compliance and support your employees during their transitions.
COBRA provides important health insurance continuity for employees facing significant life changes, allowing them to access necessary healthcare services. By proactively managing COBRA responsibilities, you create a supportive workplace that helps employees feel valued and cared for.
For personalized help with COBRA regulations and compliance, consider reaching out to a healthcare benefits expert or legal advisor. They can offer guidance tailored to your organization’s needs and help you implement effective strategies for managing COBRA.