Aflac and COBRA

[Guest Jon G.]

If a wrap plan includes AFLAC benefits, is it necessary for the employer to offer COBRA for the AFLAC benefits as well? Any help would be appreciated. Thanks.

[leevena]

COBRA applies to group medical plans. I am not knowledgeable of all of AFLAC plans, but I do believe they are individual limited plans, which would not be subject to COBRA. Since your question mentioned a "wrap plan" being offered, it should be noted that it does not matter. Just because an employer packages together a variety of plans, it does not make it a "group" type of benefit.

[Guest Jon G.]

Thanks Leevena. Do you think it matters if the supllemental AFLAC benefits are run through a cafeteria plan? Also, would it be the employer's or AFLAC's responsibility to administer the Cobra? Thanks again.

[leevena]

Thanks Leevena. Do you think it matters if the supllemental AFLAC benefits are run through a cafeteria plan? Also, would it be the employer's or AFLAC's responsibility to administer the Cobra? Thanks again.

I am sorry if my earlier posting was not clear. AFLAC policies, to my knowledge, are individual policies, not group. Only group plans are subject to COBRA. So if the AFLAC plans are individual there is no COBRA responsibility.

When an employee terminates employement at an employer who offers AFLAC policies (which are individual) AFLAC will send the employee a notice allowing them to self-pay from home.

[Don Levit]

Folks:

According to the TX DOI, having premiums paid on an individual policy through a cafeteria plan, "creates a small or large employer health benefit plan.

See http://www.tdi.state.tx.us/bulletins/2006/cc9.html.

Don Levit

[leevena]

Folks:

According to the TX DOI, having premiums paid on an individual policy through a cafeteria plan, "creates a small or large employer health benefit plan.

See http://www.tdi.state.tx.us/bulletins/2006/cc9.html.

Don Levit

Don, thanks for the input. Not being from TX, and not knowing what type of AFLAC plans were in place, I cannot say with certainity what the answer to the post was. But I do have a question for you. Let's assume the AFLAC plans are the hospital reimbursement plans I believe they are (certain dollar amount paid per day in the hospital). How would these become a group plan?

Thanks. Lee

[Don Levit]

Lee:

The answer, at least according to the TX DOI, is in the bulletin.

Being part of a cafeteria plan makes the benefits a group plan, if 2 or more employees participate.

I happen to disagree with the Texas bulletin, and sent one of several cases to refute it.

One case took place in the fifth circuit (Texas).

After submitting the case to the TX DOI, the person mentioned in the bulletin said he did not have time to read it.

What is their rationale in providing the bulletin?

According to this particular person, it is to protect the group market, regardless.

For example, if an insurer makes an individual policy available, even if underwriting is required, and at least 2 employees accept the plan, all employees must be offered the policy at rates which don't discriminate according to health status.

Don Levit

[leevena]

Interesting. Let me ask you another question.

A small employer offers hospital indemnity plans to the employees (AFLAC, Colonial, etc) and as long as the plans are run through a 125 plan, they (hospital indemnity plans) are considered group?

If this is so, does the state laws for small group now apply to these hospital indemnity plans?

Thanks.

Lee

[Don Levit]

Lee:

If the state was Texas, it would.

Again, I disagree with the TX DOI.

But, what can you do with regulators who refuse to look at federal case law, in their own state, which seems to suggest otherwise.

Don Levit

[leevena]

Lee:

If the state was Texas, it would.

Again, I disagree with the TX DOI.

But, what can you do with regulators who refuse to look at federal case law, in their own state, which seems to suggest otherwise.

Don Levit

Amazing. Don, do you sell benefits in Texas?

[GBurns]

The supplemental plans from AFLAC, Colonial, Allstate American Heritage etc can be either Group or Individual and most of either/both can be paid through a section 125 plan if desired.

[J Simmons]

IRC § 5000(b)(1) defines 'group health plan' for purposes of COBRA (and HIPAA). Such ‘group health plan’ must either (a) be contributed to by the ER, or (b) be “of the employer”. The COBRA regulations specify that health insurance provided through a cafeteria plan may be a ‘group health plan’ (Treas Reg § 54.4980B-2, Q&A-1) if either the ER makes a contribution toward the premium cost or the insurance is not available to other individuals at the same cost that it is to the ER's EEs. So, even if an ER does not bear any of the premium cost, COBRA (and probably HIPAA too) will apply if the ER negotiates special rates on the premiums (such as price breaks) for its EEs.

Thus to avoid COBRA, (i) the ER must leave it entirely up to the EE to select an individual health policy, (ii) the ER must leave it entirely up to the EE to negotiate the premium price, and (iii) the ER must not bear any of the cost of the coverage. (If the ER also remains completely out of the claims process between the EE and the insurance company, and has no medical information about the EE, then no part of HIPAA should apply either.)

If a premium-only cafeteria plan meets the bare minimums of IRC § 125, to the point of truly being a mere payroll practice as described in a couple of DoL Advisory Opinions from the 1990s, and there is a pay reduction in the exact amounts of the total premiums paid by the EE for the individual health policy so that the ER is not bearing any of the cost, then such an arrangement that reimburses EEs for the premiums they pay on such individual health policies may meet these three requirements and 'fly under the radar' of being a 'group health plan' for COBRA purposes.

If these three criteria are not met, then the bundle of individual policies coupled with the ER's involvement will be a 'group health plan' subject to COBRA (and HIPAA), and likely not have complying provisions or options--leaving the ER in lurch open to liability to the EE for the COBRA (and HIPAA) rights but without any insurance company contractually obligated to satisfy those rights for the ER.

[Jacmo]

The one word that concerns me in the OP is "wrap". It indicates that the employer has done a wrap ERISA plan document incorporating the AFLAC products. In which case, the AFLAC products are employer sponsored plans.