Protect your firm from COBRA bites - employee health benefits - Brief Article

Nation's Business, Dec, 1996 by Peter Weaver

Protect Your Firm From COBRA Bites

Employers with group health plans subject to COBRA rules and regulations have urgent homework to do to comply with recent changes in the law that expand coverage for qualified beneficiaries.

"All existing COBRA beneficiaries should have been notified of their new rights by Nov. 1," says Paul M. Hamburger, editor of COBRA Quarterly, a newsletter for employers and benefits managers. Many insurers have handled this job for their clients.

"If you haven't sent out COBRA notification letters by now," Hamburger says, "you must do so immediately to avoid possible lawsuits filed by exemployees who might claim they lost potential benefits because they weren't properly informed of their rights."

COBRA, part of the Consolidated Omnibus Budget Reconciliation Act of 1985, applies to your company if you have 20 or more employees and offer group health insurance. The law requires that employers allow former employees and their beneficiaries to continue their group health coverage for up to 29 months at the former employee's expense.

The two COBRA rule changes were included by Congress in the Health Insurance Portability and Accountability Act, which was signed by President Clinton on Aug. 21. The employer-notification requirement was also included in the law.

One change extends COBRA healthplan coverage to newborns or newly adopted children. Under the previous rules, such coverage was not included.

Under the second change, the maximum COBRA coverage of 29 months is available to those who become disabled after terminating employment or to their covered dependents. Previously, only those who were disabled before becoming eligible for benefits under COBRA were granted maximum coverage. Now, any qualified beneficiary who is determined to be disabled at any time during the first 60 days of COBRA coverage is eligible for 29 months of insurance. (Otherwise, maximum coverage is 18 months.)

Although the changes will benefit employees, they may increase premiums for employer-provided health plans. "This new law could very well make company health plans much more costly," says R. Lucia Riddle, second vice president for group insurance with the Principal Financial Group, in Des Moines, Iowa. "Studies show that COBRA beneficiaries are almost 50 percent more expensive to cover than regular employees."

Even though the former employee is paying the total cost of an individual or family health plan, heavy usage could well send premiums higher for the entire group.

"The first thing you should do," says Riddle, "is get in touch with your insurance agent and insurance carrier to see what they have to offer in the way of explanatory materials."

For further information, along with sample notification letters and other documents, you can get a Special COBRA Report, published by COBRA Quarterly, for $30 by calling (301) 595-8808.

The author is a business writer in Bethesda, Md.