Tip Tuesday! Obamacare could eliminate COBRA costs, headaches for employers

By Christian Schappel

It’s no secret Obamacare hasn’t been well received by HR professionals. On the whole, they feel it adds unnecessary complexity and costs. But there may be a silver lining to the law.

It appears likely that healthcare reform will virtually eliminate the need for COBRA insurance coverage, according to a joint report by Kaiser Health News and the Chicago Tribune.

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Benefits recordkeeping: What you must keep – and for how long

by Christian Schappel

The trouble with recordkeeping at a lot of companies: You don’t know how complete your records are until you get involved in litigation or an audit. But by then, it’s often too late to fill in any critical gaps.

That’s why it’s essential to know — before you’re charged with any wrongdoing — what documents you need to hold onto and what you can trash without putting your company at risk.

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Breaking down the barrage of new Obamacare guidance & forms

By Jared Bilski

With the main part of the Affordable Care Act set to take effect in a little over half a year, the feds have been very busy releasing new guidance. Here are the highlights of their latest efforts.

Exchange notices, SBC changes

The most recent guidance came from the DOL and offered some highly anticipated info on the notices that businesses are required to distribute to employees on the availability of health insurance exchanges.

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Open Enrollment Season is Here

The fall season is a time of change, especially for HR and benefit professionals.

Fall brings more than just daylight savings time change or the colors of the trees, it brings open enrollment. Each year HR and benefit professionals must provide employees with options for the next plan year. The list of activities for this season should include the following:

Summary of Benefits & Coverage (SBC). A new requirement for this year is the SBC, under the Affordable Care Act (ACA). You must provide an SBC to all applicants and enrollees for all group health plans, except for those that are excepted benefits under HIPAA (e.g., stand-alone dental, vision, most Health FSAs). This requirement is effective for open enrollment periods that start on or after September 23, 2012.

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IRS Gives Game Plan for COBRA Audits

COBRA is a law with a double bite:  both the DOL and the IRS routinely conduct COBRA audits and issue penalties. The IRS recently published a checklist of what it examines in these audits.

The IRS document is officially called "Audit Technique" and Tax Law to Examine COBRA Cases (Continuation of Employee Health Care Coverage).” This audit technique guide describes the IRS’ examination procedures, how it calculates the excise tax for noncompliance, the major requirements for COBRA and some key definitions like the terms group health plan, qualified beneficiary, and qualifying event.

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Heads up: The IRS could be poking around your COBRA procedures

Got all your COBRA procedures in line? Because it looks like the IRS could be stepping up its audit program.

The IRS recently released revised audit guidelines for its COBRA investigators. The new rules cover reg changes in such laws as HIPAA and FMLA. 

Russell Chapman, Lisa Taggart and Andrea Jackson, writing on employeebenefitscounsel.com, outline some of what the new rules cover: 

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Ineligible Plan Participants Prove Costly

COBRA/USERRA

A recent lawsuit reminds us why health plan ineligibility is a substantial risk that is both costly and avoidable.

The case of Denver Health and Hospital Authority v. Beverage Distributors and Principal Life Insurance was about a domestic partner enrolled in the employer’s health plan. After the participant racked up over $750,000 in medical bills from a motorcycle accident, the employer rescinded coverage because the domestic partner was ineligible according to the terms of the plan.

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Ineligible Plan Participants Prove Costly

A recent lawsuit reminds us why health plan ineligibility is a substantial risk that is both costly and avoidable.

The case of Denver Health and Hospital Authority v. Beverage Distributors and Principal Life Insurance was about a domestic partner enrolled in the employer’s health plan. After the participant racked up over $750,000 in medical bills from a motorcycle accident, the employer rescinded coverage because the domestic partner was ineligible according to the terms of the plan.

The insurance carrier preauthorized claims for the hospital stay for the participant. Later, the employer notified the carrier of the ineligible participant. Coverage was terminated retroactive to the application date, which preceded the date of the accident. The hospital then sued the employer and insurance carrier to recover the unpaid claims.

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IRS Reminds Plans of Benefit Gray Areas

Every year, the IRS clarifies areas of the law in which it will not provide guidance. For 2012, Revenue Procedure 2012-03 provides a good reminder of a few gray areas for health and welfare benefits.

Specifically, the Revenue Procedure identified 79 areas in which the IRS will not issue rulings or determination letters “because of the inherently factual nature of the problems involved, or for other reasons.” Four areas are of particular interest.

First, the IRS will not define gross misconduct as it relates to COBRA. Recall that a termination of employment involving gross misconduct is not a qualifying event. In the past, courts have differed on how to define this term. This will continue. Because gross misconduct is so murky, the usual recommendation is to offer COBRA to avoid daily penalties, excise taxes and self-insuring claims.

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Sure your TPA’s got COBRA notifications covered?

January 16, 2012 by Tim Gould

Most companies use a third-party administrator to handle their COBRA notification duties. Here’s what can happen when companies forget to keep an eye on the overall process.

An employee for Esurance had changed his mailing address from a P.O. box to his apartment’s street address. Later, he began taking intermittent FLMA leave for post-traumatic stress disorder (PTSD) until his leave was exhausted.

The employee ended up being terminated, and the TPA that handled the company’s COBRA mailings sent him a COBRA notice. However, because the TPA sent the election notice to the employee’s old P.O. address, he didn’t receive it.

Eventually, the employee received a COBRA notice – around a year and a half later. But he sued the company for COBRA notice violations, because he didn’t receive his election notice until well after the 44-day qualifying event timeframe plan sponsors are required to send it within

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IRS clears up W-2 health cost reporting rules

January 6, 2012 by Christian Schappel

The latest round of IRS guidance helps answer questions employers have raised about the requirement to report the cost of workers’ health insurance on W-2s.

The healthcare reform law mandates that employers that issue more than 250 W-2 forms for tax year 2012 must include on those statements the cost of employees’ healthcare coverage. 

Employers issuing fewer than 250 W-2s are exempt from this rule until it comes time to pass out 2013 W-2s — and possibly longer.

Points of clarification in the latest guidance:

• Employers can — but aren’t required to — report contributions made to health reimbursement arrangements
• The cost of services provided through employee assistance programs (EAP), wellness programs or on-site medical clinics is not required to be reported — unless the employer charges premiums for those services to COBRA beneficiaries

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