By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published April 7, 2009
Tucked into the $787 billion stimulus plan that Congress passed in February is a subsidy meant to help thousands of laid-off American workers afford health insurance.
Workers terminated since September have the chance to re-join their former employers’ group health insurance plans for nine months at 35% of the premium cost. Traditionally, workers had to pay 100% of the employee and employer share, plus a 2% fee, to continue coverage through the federal program known as the 1986 Consolidated Omnibus Budget Reconciliation Act. Covering that cost is often prohibitively high for those without jobs.
Though the COBRA subsidy is good news for Americans who have lost coverage, it could become an accounting and financial headache for many employers. That’s because the law places most of the burden of implementation on businesses, with little advance notice. Now many companies are scrambling to comply with the April 18 deadline for notifying former workers they can participate.
The responsibility doesn’t end there. Employers must navigate detailed rules for signing employees back up for the plan, and they must front the government’s 65% subsidy. Mistakes in the process could leave employers facing hundreds of dollars in fines per employee per day and potentially liable for fraud.
Those familiar with the details of the subsidy say small and mid-sized businesses that handle their own COBRA administration will be hit hardest by the new requirements.
Many large companies outsource those duties to third-party administrators or have human resources staff to keep up with regulations and changes in benefits. Some smaller companies also have third-party companies or carriers that do the work, but many do not.
Those employers are probably too busy trying to sell their goods or services to keep up with the nuances of employment laws, said Liz Speidel, an employment attorney with Haynsworth, Sinker Boyd in Charleston.
“If you’re doing anything outside of the employment arena, how could you?” she said.
Read more in the March 30 issue of the Business Journal.
