Submitted by: Starkweather & Shepley Insurance Brokerage, Inc.
Common Employer Benefits Mistakes
Have you faced any of these common issues? We thought it might be helpful to share a few of the common mistakes we see some organizations making in the employee benefits arena. They are usually based on a misunderstanding of the circumstances of the situation. Once reviewed in more detail, a different course of action is appropriate. By reviewing these here, we will be able to assist our clients, before they make these common mistakes. Many times employers are not completely clear on all of the circumstances when it is appropriate to offer COBRA. For instance, some employers do not offer COBRA upon loss of eligibility. This occurs most frequently when an employee is out on leave. If an employee is out on an extended leave that is not protected by FMLA, they are typically not eligible for benefits under the eligibility rules of the plan. Employers should review their plan documents to be sure it defines when eligibility is lost, then apply those rules to the situation. Some employers do not realize that the ADA, STD, LTD, and Worker’s Compensation, do not require an employer to continue to provide health insurance. Employers sometimes extend coverage beyond the plan’s loss of eligibility date. Frequently, employers are trying to “be nice” and extend the leave. But going on a leave (not protected by FMLA), or failing to return from an FMLA-protected leave, falls under the COBRA qualifying event of “reducSEPTEMBER, 2021
tion in hours.” Therefore, COBRA should be offered when eligibility is actually lost, upon the reduction in hours. Extending the coverage beyond the plan’s actual eligibility date puts the employer at risk of the carrier not paying the incurred claims. As an alternative, employers could offer to pay for COBRA coverage for a period of time. (Note: There is an exception if an employer is using the look-back measurement period and the employee has qualified for a stability period.) There is another COBRA related mistake that is commonly made: offering COBRA upon Medicare entitlement. Under the Medicare Secondary Payer Rules (MSP), an active employee’s Medicare entitlement or eligibility does not normally cause loss of plan eligibility due to MSP rules. Employers cannot condition eligibility on Medicare entitlement. The problem is that the employee might drop employer coverage voluntarily when entitled to Medicontinued on page 53
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