Employers have different ways of administering COBRA continuation coverage, as evident in a recent news article about a local candidate’s problem when he was found to owe a city government money after it paid some of his COBRA premiums.
The Post-Standard reported Oct. 27 how Timothy Lattimore (R), former mayor of Auburn, N.Y. , elected COBRA coverage after he lost reelection in 2007. He remained on COBRA “for the next two years” (individuals typically only get 18 months of coverage for an employment termination, but the two-year period was unexplained) until he won election to a county legislature seat two years ago and joined that county’s health plan in January 2010.
However, Lattimore “stopped making regular monthly payments” of his COBRA premiums in June 2009, according to the article. He did make “sporadic payments” but the city fronted the rest — resulting in a $650 difference.
Lattimore is running for the mayoral seat again, and The Post-Standard was planning to out him about the outstanding debt — which he then promptly paid.
Interestingly from the COBRA administration perspective, a former city official noted that Lattimore was not the only former employee who was tardy in paying COBRA premiums (which the city pays up front and then bills the individuals for).
“[T]he city typically sends late notices to those people and tries to work out penalty-free payment plans with them,” former City Comptroller Lisa Green told The Post-Standard.
While this action shows that the city as a generous employer, such generosity is not required by COBRA. Generally, individuals on COBRA coverage have 30 days from the due date to pay their premiums (keep in mind that a premium payment is timely if it is properly and timely sent, regardless of when it is received by the plan administrator). After that, the employer has the right to terminate them from the plan. However, a special “early termination” notice must be sent explaining why the coverage is terminating and any other rights to coverage that they may have.
Now, some exceptions do exist. For example, if a premium payment is short but an amount that is “not significant” (generally $50; or 10 percent of the amount to be paid) a plan must either: (1) treat it as payment in full for COBRA coverage; or (2) notify the individual of the shortfall amount and give him or her a reasonable period of additional time (generally, 30 days) to pay it.
Fortunately, only Lattimore seemed to get into a little hot water for his COBRA premium practices. But employers and plan administrators, particularly if they deviate from the technical COBRA rules, can expose themselves to legal liability if they are not careful. Below is a checklist from Mandated Health Benefits — The COBRA Guide to help ensure — whether you stick to the COBRA premium payment rules or go beyond them — that you avoid not so much bad press, but civil lawsuit and penalties.