Tuesday October 7th, 2014
Does the QB have COBRA coverage?
There are times in life when you just have to wait. The period between a loss of coverage due to a COBRA qualifying event and the COBRA payment is such an example.
COBRA provides a 44-day time frame for the employer/plan administrator to send an election notice. The law provides the qualified beneficiary (QB) with 60 days to elect the coverage from the loss of coverage date or when the notice is mailed, whichever is later. After electing COBRA, a QB has 45 days to pay the initial premium. During these time frames, does a QB have health coverage?
COBRA coverage during election, payment period
It’s the employer’s decision to remove the QB from the plan when coverage is lost or let the QB stay on the health plan. In the former case, any COBRA coverage could be pending until payment is received. The employer is responsible for promptly reinstating coverage back to the original loss of coverage date once payment is received.
Before an employer allows a QB to remain on the health plan during these grace periods, there are circumstances to consider. For example, how far back will an insurer allow the employer to remove a QB? Some insurers may not allow retroactive removal of more than 60 days. Review the time frames allowed: 44+60+45; that is almost five months. If an insurer allows retroactive removal of only 60 days, the employer will be self-insuring the period that the insurer disallows.
A better process would be to remove the QB from the plan and only reinstate if payment is received.
Employers should review the process with their insurer. Once the insurer has given approval to retroactively remove a QB to the original loss of coverage date when an election and payment is not received, the employer should obtain written confirmation.
Monthly Grace Periods
The monthly grace period for premium payment must be at least 30 days. If the QB does not pay the monthly premium within the 30-day grace period, the insurer should allow retroactive removal from the plan.
Claims that a QB has during the election or initial grace period could be denied. Once the QB pays for COBRA coverage and is reinstated onto the health plan, the denied claims can be resubmitted. A QB may need to request that the claims be reprocessed after being reinstated.
Complete Response of QB Coverage
When someone contacts the employer or plan administrator during these grace periods, what is the correct response to the QB’s health plan status?
The IRS final COBRA regulations require that a complete response be given to a health care provider’s request regarding a QB’s coverage status during the election and initial payment periods. A response to a provider is not as simple as “covered” or “not covered.”
Here are some ways to respond to this inquiry:
Coverage Pending Election, Payment
It’s important to inform the provider’s office that the QB is not currently on the plan during the 60-day election period, but will have coverage, retroactively, once COBRA coverage is elected and the first payment is received. The response should include specific election period dates and any premium due dates.
QB not Removed During Election, Payment Periods
The plan or administrator must inform a provider that the QB is covered, but is subject to retroactive termination if COBRA coverage is not elected and the appropriate premiums are not paid. The specific election and payment dates also should be included in the information given to the provider.
For liability protection, correct and consistent responses must be given to health care providers when they request a QB’s coverage status. COBRA is an employer law; the liability may fall back on the employer rather than an insurer. Any inquiries regarding health coverage should be directed to the employer or the plan administrator rather than an insurer.
In summary, employers should understand and establish the proper procedures regarding coverage during the election and initial payment period. If a step is missed, typically the employer will be held legally responsible for any administrative problems.
Which process does your plan follow?