In the last few months some of my clients have attended seminars that addressed various employee benefit issues, and in particular, the consequences of legislation known as COBRA (Consolidated Omnibus Budget Reconciliation Act) and HIPAA (Health Insurance Portability and Accountability Act). What they have learned is that ignorance of these laws will not absolve them from the huge penalties for non-compliance.
COBRA, very briefly, requires that employees who were covered by certain employee benefits must be offered continuation of those benefits (at their expense) when they terminate employment. Dependents who are no longer eligible because of age, employee death or divorce must also be offered continuation of benefits. Employers subject to Federal COBRA regulations are those who employed 20 or more employees on an average business day in the proceeding calendar year. Part-time employees may be pro-rated, but full time employees not covered by benefits are included in the count.
Employers with 2 or more employees but fewer than 20 are subject to CalCOBRA, the California legislation to continue benefits. The major difference between the two laws is that with Federal COBRA, the employer is entirely responsible for employee notification and premium remittance from the (former) employee to the carrier. CalCOBRA puts much of the responsibility with the carrier, but the employer is still responsible for coordinating notification between the carrier and the (former) employee or dependents. Plans affected by COBRA include (but may not be limited to) Medical Insurance, Dental Insurance, Vision Insurance, and Flexible Spending Accounts. Plans not subject to COBRA include group Life Insurance or Disability Insurance.
HIPAA went into affect just a few years ago and is far more broad-based than COBRA. Legislation requires employers with as few as two employees to communicate to employees (usually annually or more frequently) various bits of information regarding insurance benefits. This information includes (but may not be limited to) rules on when an employee or dependents may enroll, eligibility, special circumstances, pre-existing conditions limitations, plan descriptions, changes made to benefits, and information regarding the Newborns & Mothers' Health Protection Act and Women's Health Act. In addition, when an employee and/or dependents terminate coverage, the employer must send to the former insured a Certificate stating who was covered by insurance and for what time period.
The IRS will do audits to determine compliance with either of these acts. Penalties can be huge, and they have found them to be a great revenue generator. As a result, various firms have evolved to help employers become compliant. Many employers will use a Human Resource Consultant for these and other employer compliance issues. We work with a couple excellent HR Consultants. Other useful sources of information are CobraAid (cobraaid.com), Ceridian (Ceridian.com), and Advanced Benefits (advancedbenefitconsulting.com). The first two specialize in COBRA Compliance, the latter in HIPAA Compliance. Please let me know if you would like more information on resources to help you stay in compliance.
Respectfully,
Jean Strouf
