What are the rules for cancelling COBRA coverage for unpaid premiums?
An employee that elected for COBRA has yet to pay his premium. Our carrier told us to re-enroll him before we get the payment, but we want to wait until we see the money. What should we do?
Under COBRA, the plan must give COBRA enrollees a 30-day grace period to pay the premium. According to the Department of Labor, payment is considered to be made on the date it is sent to the plan.
Employers that do not receive a premium by the first day of the period of coverage have the option to cancel COBRA coverage until payment is received. However, if the premium is paid within the grace period for that period of coverage, the plan must then reinstate the coverage retroactively back to the beginning of the period of coverage. Typically, plan sponsors wait until the payment is received before starting the COBRA, and if the check arrives before 8/31, retroactive the coverage back to 8/1.
If the amount of a payment made to the plan is wrong, but is not significantly less than the amount due, the plan must notify the qualified beneficiary of the deficiency and grant a reasonable period to pay the difference. For this purpose, 30 days is considered reasonable.
According to the COBRA guidance, if after a 30-day grace period, the former employee has not paid a full premium: the plan may terminate the enrollee's COBRA coverage. However, if continuation coverage is terminated early due to failure to make a timely payment, the plan is required to provide a notice of early termination.
The sample forms and information can be found at: http://www.dol.gov/dol/topic/health-plans/cobra.htm
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