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New Rules for Handling a COBRA
by Steve Norman, J.D. SPHR
Before getting into this month’s topic on the new COBRA regulations, just a reminder that the new federal overtime exemption regulations have gone into effect. You want to be sure that all of your employees are properly classified as exempt or nonexempt from overtime. Also, a question has come up a few times regarding workplace posting requirements. Employers are not required to put up any new posters as a result of the changes in the exemption rules. Apparently, some notices and advertisements that have been sent to employers have created an impression that there is a new posting requirement, but that is not the case. Okay, now on to the new COBRA regulations.
COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, is the federal law that requires employer with 20 or more employees to offer continuation coverage to employees and their dependents participating in the employer’s group health plan who lose coverage due to a loss of employment, reduction in hours or other qualifying events. The new rules were issued on May 26, 2004, but only apply to plan years beginning on or after November 26, 2004. For employers whose plan years coincide with the calendar year, that means the rules will apply to them on January 1, 2005. However, if your plan year does not start until July 1st, then the new rules will not apply until then.
What’s New
Existing COBRA regulations identify four different notices that must be provided to inform an employee about COBRA continuation rights or to inform the employer about the occurrence of a qualifying event that triggers COBRA eligibility. The first is the initial notice employees and their dependents receive when they are first covered by the employer’s group health plan. The second is the notice the employer must send to a plan administrator notifying them that an employee has experienced a qualifying event and will be eligible for continuation coverage. The third is the notice the plan administrator must send to an employee and dependents when a qualifying event occurs explaining continuation coverage rights and providing the ability to elect coverage. Finally, the fourth is notice an employee or dependent must give to the employer when an event such as divorce occurs that may trigger COBRA eligibility or extend coverage beyond the standard 18 months.
The new rules have modified the requirements for these notices in terms of the time limit for giving notice, the process for giving notice or the content of the notice. The purpose of the new rules is to update the notices to reflect changes in the law as well as make them easier to understand. The Department of Labor which is responsible for administering COBRA has put samples of the initial COBRA notice and notice of COBRA eligibility on their website at www.dol.gov/ebsa. Employers can download and use the documents which are in Microsoft Word format. If modified to reflect the terms of the employer’s specific group health plan, use of the documents will demonstrate good-faith compliance with the new rules.
The rules also create two new notices. The first is a notice of unavailability of coverage. An employer must send this to an employee or dependent who provides notice to the employer of a qualifying event, but who is ineligible for continuation coverage for whatever reason. By sending this notice, the employee or dependent is not left wondering why he or she did not receive any information or an election form from the employer for continuation coverage.
The second new notice is for early termination of coverage. Employers must provide this new notice any time an event occurs, such as failure to make premium payments, that causes continuation coverage for an employee or dependent to terminate sooner than expected. As with the notice of unavailability of coverage, the purpose of this notice is to provide specific notice that coverage has been terminated and the reason for the termination so the employee or dependent knows he or she is no longer covered and no longer eligible for benefits.
What Should You Do?
This is a brief overview of COBRA law and the new regulations and is not meant to provide comprehensive information about the changes. If your health plans are subject to COBRA, you should check with your plan administrator to make sure they are aware of the new rules and have modified their notices accordingly so that you are not out of compliance.
Technology Corner: Application Service Providers - Are they for you?
By Rich Noland, Ph.D.
Application service providers (ASP) are third-party entities that manage and distribute software-based services and solutions to customers across the Internet from a central data center. They have been gaining traction in the marketplace as a way for small companies to take advantage of the latest in technology without having to invest in an IT infrastructure. With limited IT budgets and know how, small companies are turning to ASP’s to fill their IT needs.
For example, HRCentral.net is a web-based collaboration ASP that provides calendaring, contact management, bulletin board, threaded discussion, document management and voting capabilities for companies that need to share information with their customers, clients, vendors or anyone else, but don’t want to open up their internal networks to outsiders and risk security breaches. It is built on a platform that cost over a million dollars to develop. It is being updated monthly by a technical staff that is focused solely on incorporating the latest technology advancements into the product. The hosting environment for the product has been created by the investment of tens of thousands of dollars to insure redundancy (clustering of servers), security (24 by 7 onsite monitoring), backups (daily and stored off site), and state of the art firewalls and technology safeguards. It would be cost prohibitive for most small companies to fund this kind of development and ongoing hosting.
Yet for pennies on the dollar, our clients take advantage of the technological experience and ongoing service that we provide. We make money by amortizing our cost over our entire client base. Our clients save money by only paying for what they need and use.
An ASP can bypass the daily ongoing support that overworked IT departments get bogged down with and provide a fast solution that can flex to the changing needs of the company. No servers to host, no upgrades to install, no IT consultants and the opportunity to be treated like a customer makes an ASP an attractive alternative to an in-house solution. Also, innovation is not risky. A good ASP will allow you to “try it and see” and allow you to back out of a contract if it stops meeting your needs.
Another hallmark of a good ASP is that you can work from anywhere. For example, clients of HRCentral.net can work from home, their office or even a cyber café. There are no risky firewall protocols to deal with. Because it is an extranet to begin with, the service was built with the highest security standards incorporated into its very functionality. One law firm, Moses and Singer, specifically chose our collaboration product because of its security features. Moses and Singer represent some of the banks that are in litigation with Enron and needed an ASP that not only met their collaboration needs but was highly secure for storing those sensitive litigation documents. After an exhaustive search, this New York law firm chose our technical solution as their ASP.
An ASP might be a solution to your technology needs. Some questions you want to ask are:
· Can we try it first?
· If we start to use it and it doesn’t work out for us can we take it in-house
or go to another solution?
· Is it secure?
· Is it insured?
· Is it cost effective?
If the answers to those questions are yes, then it would be worth your while as a user of technology to explore ASP’s as a way of getting cost effective IT support.
[PRINTER FRIENDLY VERSION]
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