COBRA billing looks like an accounts-receivable task and is really a compliance task. The amount you may charge, when payment is due, what counts as timely, and how you handle a shortfall are all governed by rules — and getting any of them wrong turns a routine termination of coverage into a claim.
Plans may generally charge qualified beneficiaries up to 102 percent of the applicable premium — the full cost of coverage plus a 2 percent administrative allowance. During a disability extension, a higher percentage is permitted for the extended months.
The applicable premium is the cost to the plan of providing coverage for similarly situated individuals, determined in advance for a defined period. It is not the employee's former payroll deduction, and confusing the two is a common error that under-bills and is difficult to unwind later.
Premiums are typically billed monthly. Establish and document:
Send a statement each period. There is no requirement that a plan invoice, but plans that do not invoice find termination decisions much harder to defend.
Payment is generally treated as made on the date it is sent, not received. A payment postmarked on the last day of the grace period is timely even if it arrives later.
Billing systems that record receipt date and terminate on that basis will terminate people who paid on time. Retain envelopes or postmark evidence where payment is close to the deadline.
Where a payment is short by an amount that is not significant, the plan must either treat it as full payment or notify the beneficiary of the deficiency and give a reasonable period to pay it. Terminating coverage over a small shortfall without that notice is a clear failure and a frequent source of claims.
Build the shortfall notice into the process rather than handling it case by case.
Coverage may be terminated where payment is not made by the end of the grace period. To defend it you need to show: the amount due and how it was calculated, that a statement was sent, the due date and grace period applied, that no timely payment was received, that any shortfall procedure was followed, and that the required termination notice was provided.
Absent those records, a termination is difficult to sustain.
Coverage is retroactive to the date of the qualifying event once the initial payment is made. Plans may suspend coverage pending payment, provided it is reinstated retroactively — but claims incurred during suspension must then be processed, so carriers and administrators need to be aligned on the approach.
Billing is the part most often outsourced, and liability is not. Confirm that the administrator applies postmark-date rules, operates a shortfall notice process, and retains evidence of statements sent. Sample a few terminated files annually and check that the evidence exists.
Billing and coverage need to stay aligned, and they drift more often than administrators expect. A payment received but not posted, or posted to the wrong period, produces an incorrect termination that is difficult to unwind once the carrier has been notified.
Reconcile premium receipts against coverage status monthly rather than at renewal. Where a discrepancy appears, resolve it before terminating, because reinstating coverage after an erroneous termination generally requires carrier cooperation that is not guaranteed.
Most payment failures are not refusals to pay — they are misunderstandings about amounts, deadlines or methods. A clear statement showing the period covered, the amount due, the due date, the end of the grace period and accepted payment methods removes most of them.
Where a beneficiary contacts you about a difficulty, record the conversation. Disputes about what was said during a grace period are common, and contemporaneous notes resolve them.
Not strictly, but doing so is what makes a later termination defensible.
Requiring a single method can be problematic; offering options is safer.
Check the postmark. If it was sent within the grace period, coverage should not have been terminated.
See COBRA election and payment rules and employer requirements under COBRA. For full training, see the COBRA training and certification program.
Recommended Online Training Courses
1-770-410-1219
support@HRTrainingCenter.com
770-410-1219
