Comments on: IRS announces penalty for misuse of COBRA subsidy http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/ Your daily dose of HR Thu, 18 Mar 2010 13:43:13 -0400 http://wordpress.org/?v=abc hourly 1 By: BW http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-26401 BW Mon, 21 Sep 2009 14:51:38 +0000 http://www.hrmorning.com/?p=4086#comment-26401 I was told by our "Cobra company" and State UI, if you have a police report (for theft, murder, etc) that would definitely be a gross misconduct termination situation. I was told by our “Cobra company” and State UI, if you have a police report (for theft, murder, etc) that would definitely be a gross misconduct termination situation.

]]> By: Patricia http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-25623 Patricia Tue, 15 Sep 2009 16:50:31 +0000 http://www.hrmorning.com/?p=4086#comment-25623 Wow, lots of different questions and issues. Involuntary terminations are subsidy eligible even for cause. I told my assistant to offer COBRA to those terminated that are marked as gross misconduct. We still get managers who mark a termination as gross misconduct because the employee swore at them. There is no clear legal definition of gross misconduct and it isn't worth the fight. Unless there was physical violence or murder, it is safer to send them the COBRA paperwork. Everyone is correct about no pre-ex issues if there is no lapse in coverage per HIPAA. He could carry the COBRA at the subsidized rate until he is eligible for coverage under the new insurance and then he would not be eligible for the subsidy. I did some digging regarding someone who already has Medicare Part A or other coverage and according to the ARRA FAQs, it doesn't matter. If someone has other coverage, they do not qualify for the subsidy. Even if someone was able to enroll in spousal coverage and denied it and now is ineligible for spousal coverage, they do not qualify for the subsidy. I believe the exception is military/veteran Tricare coverage. I believe I read you cannot exclude them. Those who say it isn't costing the employer anything because of the tax break must not be self insured. The fully insured plans won't see the impact until their renewal. We pay the employee claims out of our company funds. The 65% we can deduct from our taxes won't be much of a dent if someone has a $50,000 claim. Even those who are fully insured will feel the pain when they get their rate renewals. If COBRA participation significantly increases and those enrolled on COBRA have large claims, a fully insured company will get hit with an abnormally high renewal. Everyone is paying for the subsidy either in direct claim dollars or significantly increased renewal costs or both. I do think it is nice the government is helping with some of the costs via the payroll tax deductions but under no circumstance can anyone assume the 65% tax break will fully cover the cost of having all these additional people enrolled in COBRA. I believe the IRS/DOL just published the info on how to notify them if someone is on the subsidy and is not eligible. There is a form or something to submit. This is VERY recent. Patricia Wow, lots of different questions and issues.

Involuntary terminations are subsidy eligible even for cause. I told my assistant to offer COBRA to those terminated that are marked as gross misconduct. We still get managers who mark a termination as gross misconduct because the employee swore at them. There is no clear legal definition of gross misconduct and it isn’t worth the fight. Unless there was physical violence or murder, it is safer to send them the COBRA paperwork.

Everyone is correct about no pre-ex issues if there is no lapse in coverage per HIPAA. He could carry the COBRA at the subsidized rate until he is eligible for coverage under the new insurance and then he would not be eligible for the subsidy.

I did some digging regarding someone who already has Medicare Part A or other coverage and according to the ARRA FAQs, it doesn’t matter. If someone has other coverage, they do not qualify for the subsidy. Even if someone was able to enroll in spousal coverage and denied it and now is ineligible for spousal coverage, they do not qualify for the subsidy. I believe the exception is military/veteran Tricare coverage. I believe I read you cannot exclude them.

Those who say it isn’t costing the employer anything because of the tax break must not be self insured. The fully insured plans won’t see the impact until their renewal. We pay the employee claims out of our company funds. The 65% we can deduct from our taxes won’t be much of a dent if someone has a $50,000 claim. Even those who are fully insured will feel the pain when they get their rate renewals. If COBRA participation significantly increases and those enrolled on COBRA have large claims, a fully insured company will get hit with an abnormally high renewal.

Everyone is paying for the subsidy either in direct claim dollars or significantly increased renewal costs or both. I do think it is nice the government is helping with some of the costs via the payroll tax deductions but under no circumstance can anyone assume the 65% tax break will fully cover the cost of having all these additional people enrolled in COBRA.

I believe the IRS/DOL just published the info on how to notify them if someone is on the subsidy and is not eligible. There is a form or something to submit. This is VERY recent.

Patricia

]]> By: Greg Hopkins http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-25492 Greg Hopkins Mon, 14 Sep 2009 20:31:52 +0000 http://www.hrmorning.com/?p=4086#comment-25492 To the first responder above. If Fred had insurance with his former employer, and then was able come onto another group plan, his pre-existing condition would be waived. As long as you can show proof of prior coverage, pre-existing clauses do not apply. To the first responder above. If Fred had insurance with his former employer, and then was able come onto another group plan, his pre-existing condition would be waived. As long as you can show proof of prior coverage, pre-existing clauses do not apply.

]]> By: Will http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-23330 Will Thu, 27 Aug 2009 02:12:44 +0000 http://www.hrmorning.com/?p=4086#comment-23330 Re. Mary B. "Makes no difference how expensive the other coverage may be, just that they are eligible to enroll in it" I have started a new position (6 month contract) that is offering insurance. It is bad insurance, with significantly worse coverage than my current Cobra insurance. The premiums for the insurance are also very high, basically the same as my current Cobra insurance without the reduction. I think it stinks that I have to drop my reduced-rate on Cobra (which I still have 8 months remaining) due to being offered this crummy insurance! Re. Mary B. “Makes no difference how expensive the other coverage may be, just that they are eligible to enroll in it”

I have started a new position (6 month contract) that is offering insurance. It is bad insurance, with significantly worse coverage than my current Cobra insurance. The premiums for the insurance are also very high, basically the same as my current Cobra insurance without the reduction. I think it stinks that I have to drop my reduced-rate on Cobra (which I still have 8 months remaining) due to being offered this crummy insurance!

]]> By: George http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-22842 George Mon, 24 Aug 2009 15:33:25 +0000 http://www.hrmorning.com/?p=4086#comment-22842 Regarding Fred's pre-existing issue; with a certificate of continuing coverage uninterrupted over the period of pre-COBRA insurance while employed, then progressing to COBRA enrollment with no coverage lapse for the obviously post employment period, Fred and his pre-existing and covered health issues, relative to any just beginning and new health insurance is covered. This is one advantage of COBRA, and Fred could thus accept new health insurance without fear of coverage lapses for pre-existing conditions. This eliminates any consideration Fred may surface regarding pre-existing rationale and therefore could not refuse this new policy as offered. Regarding Fred’s pre-existing issue; with a certificate of continuing coverage uninterrupted over the period of pre-COBRA insurance while employed, then progressing to COBRA enrollment with no coverage lapse for the obviously post employment period, Fred and his pre-existing and covered health issues, relative to any just beginning and new health insurance is covered. This is one advantage of COBRA, and Fred could thus accept new health insurance without fear of coverage lapses for pre-existing conditions. This eliminates any consideration Fred may surface regarding pre-existing rationale and therefore could not refuse this new policy as offered.

]]> By: Susan http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-22191 Susan Wed, 19 Aug 2009 14:48:19 +0000 http://www.hrmorning.com/?p=4086#comment-22191 The cost to employers who are self-insured is not necessarily small. This allows people to have the coverage at minimal cost yet we are still paying the claims. If they have the coverage available through a spouse's plan, they should be on their plan. The cost to employers who are self-insured is not necessarily small. This allows people to have the coverage at minimal cost yet we are still paying the claims. If they have the coverage available through a spouse’s plan, they should be on their plan.

]]> By: Jeanette http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-22189 Jeanette Wed, 19 Aug 2009 14:36:44 +0000 http://www.hrmorning.com/?p=4086#comment-22189 One of my students was laid off from her job and would have been eligible for the subsidy. However, it was possible for her husband to add her to his plan at full cost, which was unaffordable so she could not have the subsidy. She did not take the coverage. Then he got laid off. Now they are both in trouble. Seems to me that the SPIRIT of this law was to help people maintain coverage, not to make them pay more. Stupid laws! We as employers should be less concerned with administration, since the actual cost to us is small and be trying to implement the underlying purpose of the COBRA subsidy. One of my students was laid off from her job and would have been eligible for the subsidy. However, it was possible for her husband to add her to his plan at full cost, which was unaffordable so she could not have the subsidy. She did not take the coverage. Then he got laid off. Now they are both in trouble. Seems to me that the SPIRIT of this law was to help people maintain coverage, not to make them pay more. Stupid laws! We as employers should be less concerned with administration, since the actual cost to us is small and be trying to implement the underlying purpose of the COBRA subsidy.

]]> By: Heather http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-22177 Heather Wed, 19 Aug 2009 13:04:16 +0000 http://www.hrmorning.com/?p=4086#comment-22177 Pre-existing conditions do not apply here. As long as he has not had a break in coverage of more than 63 days there is no pre-existing coverage issue. Even if he had a heart condition previously it would be covered under his new medical plan. If he did not elect COBRA and had a break in coverage for more than 63 days then he would be subject to the the pre-existing condition waiting period before those conditions would be covered under his new plan. Pre-existing conditions do not apply here. As long as he has not had a break in coverage of more than 63 days there is no pre-existing coverage issue. Even if he had a heart condition previously it would be covered under his new medical plan. If he did not elect COBRA and had a break in coverage for more than 63 days then he would be subject to the the pre-existing condition waiting period before those conditions would be covered under his new plan.

]]> By: dwp http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-22128 dwp Wed, 19 Aug 2009 03:38:02 +0000 http://www.hrmorning.com/?p=4086#comment-22128 Who do employers need to contact about an ex-employee who signed up for the COBRA subsidy but is eligible for their spouse's plan? We've contacted the ex-employee several times and informed them of the rules but they still insist on the subsidy. I had another HR contact say they'd tried to notify the correct people about a a similiar situation with their employer and no one wanted to act on it. Who do employers need to contact about an ex-employee who signed up for the COBRA subsidy but is eligible for their spouse’s plan? We’ve contacted the ex-employee several times and informed them of the rules but they still insist on the subsidy. I had another HR contact say they’d tried to notify the correct people about a a similiar situation with their employer and no one wanted to act on it.

]]> By: Roberta http://www.hrmorning.com/irs-announces-penalty-for-misuse-of-cobra-subsidy/comment-page-1/#comment-22105 Roberta Tue, 18 Aug 2009 23:39:12 +0000 http://www.hrmorning.com/?p=4086#comment-22105 Re: SUSAN What if Fred wasn’t laid off, but was involuntarily terminated for cause. Not gross misconduct, so he is eligible for COBRA in itself; but ample cause leading to involuntary termination. The Subsidy appears to extend to these individuals – however, was that the intent? If an employee terminates an employee because they have poor performance and/or other well documented disciplinary issues – was the intent of the law to have the employer pay a portion of the COBRA and enact the subsidy? The company does not pay for the subsidy, the government does; that money is reimbursed to the company. Involuntary termination unless for gross misconduct has no effect on benefits. Re: SUSAN What if Fred wasn’t laid off, but was involuntarily terminated for cause. Not gross misconduct, so he is eligible for COBRA in itself; but ample cause leading to involuntary termination. The Subsidy appears to extend to these individuals – however, was that the intent? If an employee terminates an employee because they have poor performance and/or other well documented disciplinary issues – was the intent of the law to have the employer pay a portion of the COBRA and enact the subsidy?

The company does not pay for the subsidy, the government does; that money is reimbursed to the company. Involuntary termination unless for gross misconduct has no effect on benefits.

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