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Small Employer and HIPAA/COBRA


Guest lmccormick
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Guest lmccormick

Do I understand this correctly that small employers who self-administer an HRA are not subject to HIPAA if they have 49 or fewer participants?

And if they have fewer than 20 they are not subject to COBRA?

How would COBRA apply anyway when the employer doesn't have group health insurance but only offers funds the employee can tap to pay for actual out of pocket medical expenses? Does it just mean we have to allow them to deplete their account balance even if they are no longer employed (in order to be COBRA compliant) ?

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An employer is subject to COBRA if the employer normally employed 20 or more FTE employees (whether or not the employees are eligible to participate in the plan) on a typical business day in the preceding calendar year. So, an employer would have determined on January 1, 2005 if the employer is subject to COBRA for 2005 based on employee counts for 2004. An employer that is subject to COBRA for 2005 remains subject to COBRA for all of 2005 even if the employer normally employs fewer than 20 employees during 2005. (But the employer might not be subject to COBRA in 2006 based on the 2005 employee counts.)

COBRA for an HRA essentially works like COBRA for a medical FSA. The employer can charge a monthly COBRA premium for continued access to non-taxable reimbursements from the HRA. The monthly COBRA premium is a maximum of 102% of 1/12 of the total amount credited to the HRA for the calendar year (not including rollover amounts).

However, unlike FSAs, COBRA does not permit the employer to cut off COBRA at the end of the calendar year in which the COBRA qualifying event occurs. COBRA must be offered for the entire 18, 29, or 36-month COBRA period.

Like FSAs, a qualified beneficiary generally only elects COBRA for an HRA when the QB is going to incur a significant reimbursable expense soon after the qualifying event. Because the QB is not required to continue COBRA coverage for the HRA after the QB exhausts the available reimbursements, the QB can come out ahead even though the QB is paying the COBRA premiums on an after-tax basis.

For example, employee is credited with $1,200 in HRA on January 1. Employee terminates employment on March 31 before submitting any expenses for reimbursement from the HRA. Employe elects COBRA for the HRA and pays a COBRA premium of $102 for April ($1,200/12 = $100 x 102% = $102). Employee incurs a reimbursable expense of $1,200 in April, which exhausts the HRA. Employee terminates COBRA as of May 1, having paid $102 for the $1,200 reimbursement.

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Guest lmccormick

That was a fabulous explanation! Thank you very much for taking the time to post it for me.

Can you just clarifiy two things for me:

1. An employer may "charge" a premium for continued access to the HRA account from a terminated employee even though the funds were initially provided at no cost to the employee when they were employed?

2. You said " COBRA must be offered for the entire 18, 29, or 36-month COBRA period". What determines whether the period is 18, 29 or 36 months?

Lisa

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#1 - Yes, the employer can charge a COBRA premium for continued access to an HRA even though the employee didn't pay anything for access to the HRA while employed. This is no different than if the employer paid the full cost of health insurance while the employee was employed; the COBRA premium is based on the total cost of the benefit, not just the portion paid by the employee while actively employed.

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I have had cobra for 24 months, I recently became eligible for medicare. Can I keep cobra for the full 29 months, because I don't want to lose my dental, prescription, or major medical insurance. Am I allowed to continue my cobra for the remaing 5 months because I don't want to lose the above mentioned insurances.

Thank you for all replies,

Keith :(

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