Seamless, modern COBRA

Topher Reynoso
January 21, 2024

COBRA grants departing employees an option to stay insured. It requires meticulous administration to ensure proper compliance. But for decades it’s been nothing more than a checkbox. What does the future hold? 

While the requirements remain largely the same, the landscape for COBRA has changed quite a bit since it was first enacted. So what makes COBRA modern and how do you know if your off-boarding is as seamless and easy as it should be for former employees? Here’s a quick guide to understanding what modern COBRA means and how to determine if your current solution is best-in-class.

Why does COBRA exist?

COBRA was originally made to help employees when they leave an employer. It was meant to allow them to keep their health insurance so that they could continue to have their health conditions covered since, before the ACA, insurers could exclude pre-existing conditions (the health problems people already have when they sign up for insurance). After the ACA though, insurers are no longer allowed to exclude pre-existing conditions. While that has removed some of the original value of COBRA, there are definitely situations where COBRA is still very beneficial to former employees. However, in the modern world, the old COBRA administration just isn’t going to cut it anymore.

Which employers are required to offer COBRA?

While COBRA technically only applies to employers with 20 or more employees, over the years states have layered on their own laws and requirements related to offering continuation coverage to former employees. Nearly all states have some requirements at this point, the vast majority of them require some sort of continuation rights to be granted and many of them require it even when the employer has less than 20 employees.

What does proper COBRA support entail?

Employer responsibilities and risks related to COBRA look mostly the same. Administering COBRA still means providing timely notifications, ensuring seamless transitions for departing employees, properly handling enrollment and dis-enrollment in company plans, collecting premiums from former employees, and making changes as those former employees experience qualifying events that impact their rights to COBRA participation (like having a baby, etc).

Do employers have to do this on their own?

That’s a lot for an employer to navigate on their own. As a result, most employers work with their benefits broker and coordinate with a COBRA administrator who just handles all of those requirements for them. According to the Society for Human Resource Management, more than 75% of employers use a third-party administrator for their COBRA needs. Engaging a specialized COBRA administrator helps mitigate risks, ensures compliance, and provides expertise in managing the federal and state intricacies involved with continuation coverage.

So what does a modern COBRA administrator do?

We talked about how the ACA changed some of the landscape for COBRA but there are other factors that are impacting how former employees engage with health insurance as they’re departing. Here are a few additional items that should be considered for a modern COBRA experience:

1. Integration with existing employer HR systems

These days, employers are using HRIS systems, payroll systems, benefits administration systems, and the like to make their lives easier. Rather than having to juggle all of those payroll, HR, and benefits tasks themselves, they usually leverage software from great companies who make this much easier for them, often combining all of those things into one solution. A modern COBRA administrator will integrate with those systems to make an employer’s life easier. That way they don’t have to communicate constantly with multiple parties to make sure that everything gets handled. A modern administrator should be plugged into your HRIS, payroll, benefits stack so that they just automatically get notifications when someone is terminated, leaves voluntarily, or experiences a life event that triggers COBRA rights (like a divorce).

2. A holistic approach to off-boarding

Off-boarding can be a confusing time for both an employee as well as an employer. There are all kinds of legal landmines you have to watch out for. A modern COBRA administrator should make this burden feel lighter. Forbes highlighted data indicating that 75% of people on job-based insurance and 68% of people on COBRA feel “completely lost” in trying to understand health insurance. HR doesn’t have time to sit and explain COBRA and all of the other options that may be available to someone and even if they did, they’re often not qualified and it would be a legal risk for the HR team to take on a task like that. A modern COBRA administrator stands out by providing personalized support, ensuring departing employees feel supported and guided during their transition into continued health coverage, whether that’s COBRA or another option that may be better suited to their needs.

A more holistic approach to supporting employees on these types of decisions aligns health coverage continuation with the organization's overall departure process, creating a more cohesive and supportive experience for departing employees. It allows HR to hand folks off to a partner that’s dedicated to helping that former employee succeed in finding coverage and thereby lowers legal exposure for the employer as well. Supported former employees are less likely to be disgruntled and cause additional problems for your already overworked HR team.

COBRA administration demands expertise, compliance, and a human-centric approach. If your current COBRA process isn’t exactly humanizing, take a look at what modern off-boarding can look like!

By entrusting COBRA administration to Kept, employers gain a strategic partner committed to ensuring compliance and humanizing the off-boarding journey. Kept's unique approach stands as a testament to its dedication to supporting departing employees beyond their tenure, fostering a more compassionate departure experience.

Topher Reynoso
January 21, 2024
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