It’s the end of the school year and your charter school probably has some employees who are not returning for next year. You provided them with their final paycheck and have completed their exit interview. Their health insurance coverage has been cancelled with the insurance carriers. That’s all that you have to do, right? Well that depends. If you are a charter school in California with 19 or less full time employees, then you qualify for Cal-COBRA. If you have 20 or more full time employees, then your school falls under Federal COBRA.
If you are a small charter school and fall under Cal-COBRA, your insurance carriers will do the majority of the work for you. Your responsibility as the Employer is to notify your insurance carriers, within 30 days, of the employee’s termination date. After you notify your insurance carriers of the termination, the insurance carriers will send out the COBRA notices to the employee. The COBRA notice will inform the employee of their rights to continue their health care coverage, the cost for the COBRA coverage, and instructions on how to enroll. Should the employee elect COBRA coverage for themselves or any previously covered family members, the insurance carrier will bill the employee directly each month for the health insurance premium.
Most charter schools are going to fall under Federal COBRA. As the employer, you still must notify your insurance carriers, within 30 days, of the employee’s employment termination. There are additional steps that must be taken to adhere to the COBRA laws. The employer can choose to send out the COBRA notices themselves. This option saves money, but requires a little more work on the Employer’s part. The other option is to hire a COBRA Administrator to send out all required notices and to handle the billing. There is typically a fee for a COBRA Administrator. The employer still has work to do on their end, even if they hire a COBRA Administrator. Let me explain.
Using a COBRA Administrator
When you hire a COBRA Administrator to handle your COBRA processing, you will need to provide the administrator with several pieces of information. They will require that you send them over copies of all of your plan descriptions and rates. If your charter school is on aged-based rating, you will need to provide the rate table for each age bracket. Additionally, the administrator will require a census of your staff that includes everyone’s home address and the dependents that are currently covered on the plans. Every year, the COBRA Administrator will ask you to update all of this information and they typically want you to complete several of their forms as well. If you are using an administrator, after you terminate an employee with your insurance carriers, you will also need to notify your COBRA administrator of the terminated employees. Many administrators have a website that you login to and complete their online form for this process.
Administering COBRA yourself
If you plan to forgo using an administrator and want to process the COBRA yourself, here is what you need to know. Every employee is required to receive a General Notice of COBRA Rights no later than 90 days after their coverage under the plan begins. You can obtain a sample of this notice on the Department of Labor’s website at:
Upon employee’s termination, after you terminate an employee with the insurance carriers, you will need to send out the COBRA Election Notice to the former employee’s home. This notice must be sent timely, within 14 days. It is recommended that this notice be sent as promptly as possible. In this notice you will include the current rates of the insurance plans the employee was enrolled in. You can add in a 2% admin fee to the rate. Your school would keep the 2% admin fee for acting as the COBRA Administrator. You should also include a copy of the plan descriptions with the Election Notice. A sample of this notice can be found on the Department of Labor’s website at:
Should the former employee decide to elect COBRA coverage for themselves or dependents, the employee would return the election notice to the school with payment of their first month’s premium. Many insurance carriers will also require the completion of a COBRA enrollment form. If this is the case with your carrier, you will need to follow up with the employee to provide them any additional forms that need to be completed.
It is not the employer’s responsibility to send a bill or invoice to the COBRA participant each month. You can send a coupon booklet that the participant can use to remit payments each month. However, responsibility of the payment of the COBRA premiums falls solely on the COBRA participant. Your charter school will be billed each month on your health insurance invoice for any COBRA enrollees. It is the school’s responsibility to pay the invoice in full. The COBRA participant will mail you their payment, made out to the school, each month. If payment is not received by the last day of the month, you have the right to terminate that COBRA participant’s coverage with the health insurance carrier. If coverage has been terminated, a termination notice should be sent with the reason for coverage being terminated.
If your rates or plans change during open enrollment, any COBRA participants need to be notified of these changes. Be sure to collect any additional premiums with any rate increase your plans have taken.
If you fail to comply with the COBRA laws or neglect to offer COBRA to any terminated employees, you could be subject to fees and penalties. These penalties for violations include:
- Excise tax penalties of $100 per day ($200 if more than one family member is affected)
- Statutory penalties of up to $110 per day under the Employee Retirement income Security Act (ERISA)
- Civil lawsuits.
- Attorneys’ fees and interest.
Remember, just by having a COBRA Administrator, you are not protected from these penalties. If the COBRA Administrator fails to send out notices, the penalties for violations still fall upon the employer.
If you have any questions regarding COBRA or need any assistance with your employee benefits for your charter school, please contact me at (760) 622-6080 or by using my Contact Form. You may also contact me through any of my social media accounts.