Initial Premium Payment for COBRA

[Guest Devbeth]

In a situation where a terminated employee elects COBRA on day 1 of their 60 day election period, and just for grins, let's say that date is August 1, if they wait the full 45 days to pay the premium, do they need to pay August and September?

Or do they pay August in full and half of September?

Thanks!

[papogi]

My understanding is that they really should pay for August and September in full. August is due on 8/1 and September is due on 9/1. By the middle of September, both the Aug and Sept payments would past their due dates and would be considered retroactive payments to get up to date as of the middle of September.

[Guest chloe]

They can wait the 45 days after the election to make the first month's payment. Then they have a 30 day grace period for each subsequent month. So, if the coverage is effective 8/1 and they make their election 8/1, they can wait 45 days to pay August. If the September payment is due 9/1, they don't actually have to pay it until 9/30, and on and on like that.

[Guest Devbeth]

Ok, now I am really confused. These two posts contradict each other.

I didn't think there was a 'grace period' for the first payment - it's due in 45 days, or else. And I thought I read somewhere that the first payment was to 'bring them current'.

We have a potential continuee who can be a trouble maker, when given the opportunity. I am not interested in bending or breaking rules, but am also not interested in being an example in the media.

Thanks -

[JanetM]

Here is how I understand it.

Once COBRA continuation is elected, there is a 45-day grace period to pay the initial premium payment. The initial premium payment covers a period beginning the date coverage was originally lost to the end of the current coverage month. This means if they wait 45 days they can pay two months for first payment on day 45 or they pay one month on day 45 and one month on day 60.

Subsequent monthly premium payments are due on the first day of each month of coverage and must be sent within 30 days from the due date.

[MARYMM]

Ok, now I am really confused. These two posts contradict each other.

I didn't think there was a 'grace period' for the first payment - it's due in 45 days, or else. And I thought I read somewhere that the first payment was to 'bring them current'.

We have a potential continuee who can be a trouble maker, when given the opportunity. I am not interested in bending or breaking rules, but am also not interested in being an example in the media.

Thanks -

Chloe's scenario is correct. If election is made on 8/1 for Aug. coverage - payment is not due until 9/15

Payment for Sept. is due by 9/30

That being said, some COBRA participants like to get current so that they don't run into any claim denial issues.

[leevena]

The individual has 60 days to decide whether to elect COBRA continuation coverage. (This 60 day period allows for the employee to change their election as many times as they would like). The person then has 45 days after electing coverage to pay the initial premium.

Using your example, they "elected" coverage on Day 1 (Aug 1), but have 60 days to change their mind. August 1 premium is due, but there is a 45-day period for them to pay, which is September 15. Therefore only August premium is due at this time. (There is a provision that allows for COBRA participants to pay less than the 100% due and still be covered, but let's not bring that into play for this example).

Now the curve ball. Since this person has 60 days to choose, they can change their mind, tell you they do not want COBRA, and then on the 60th day (Oct 1) elect coverage.

If I may make a suggestion, you may want to invest in either a cobra software package or have an outside firm do it for you. COBRA is still an employer risk, but either route should help you. Your health insurance broker should be able to direct you to the best alternative based on your needs.

Here is a good website to visit for information http://www.dol.gov/dol/topic/health-plans/cobra.htm

Good luck.

[Guest freeh]

can someone confirm if the following is correct:

if employee is terminated 8/15 and coverage ends 9/30, then:

1) ee has until 11/30 to elect COBRA; and

2) ee has until 1/15/08 to make first month (October) COBRA payment if he elects COBRA on 11/30.

[leevena]

can someone confirm if the following is correct:

if employee is terminated 8/15 and coverage ends 9/30, then:

1) ee has until 11/30 to elect COBRA; and

2) ee has until 1/15/08 to make first month (October) COBRA payment if he elects COBRA on 11/30.

The link I posted in the above response can help you too.

The initial premium payment must be made within 45 days after the date of the COBRA election by the qualified beneficiary. Payment generally must cover the period of coverage from the date of COBRA election retroactive to the date of the loss of coverage due to the qualifying event.

Premiums for successive periods of coverage are due on the date stated in the plan with a minimum 30-day grace period for payments.

Hope this answers your question.

[oriecat]

can someone confirm if the following is correct:

if employee is terminated 8/15 and coverage ends 9/30, then:

1) ee has until 11/30 to elect COBRA; and

2) ee has until 1/15/08 to make first month (October) COBRA payment if he elects COBRA on 11/30.

Technically he would have until 11/29 to elect COBRA, since October has 31 days. And then payment is due on 1/13/08. Payment would be due for October, November and December premiums since the initial premium needs to bring you current with all past due premiums.

[Guest freeh]

thanks for responding. premium payments are due on the 1st of each month. so the employee in my example has to pay october, november, december and january by 1/15 (the date the first payment is due)? but they have an add'l 15 days grace until 1/30 for the january premium?

can i ask how you show this on the cobra notice? i have the dol model notice, but i'm at a loss as to how to set up the payment schedule.

thanks again.

[Guest freeh]

Technically he would have until 11/29 to elect COBRA, since October has 31 days. And then payment is due on 1/13/08. Payment would be due for October, November and December premiums since the initial premium needs to bring you current with all past due premiums.

thanks oriecat. how do you reflect that payment schedule in the cobra notice?

also, do you send the cobra notice out to a former employee separately from their dependent child? or do you send one notice to both?

[leevena]

thanks for responding. premium payments are due on the 1st of each month. so the employee in my example has to pay october, november, december and january by 1/15 (the date the first payment is due)? but they have an add'l 15 days grace until 1/30 for the january premium?

can i ask how you show this on the cobra notice? i have the dol model notice, but i'm at a loss as to how to set up the payment schedule.

thanks again.

No need to pay for January, since they have 30 days.

Payment schedule is relatively simple, just show them them individual monthly dates of service with the cost for that period, then aggregate it to total due. If you do not have a software program for cobra, you may want to purchase one to make all of this easier in the future.

[Guest freeh]

thanks. do you have a software program you'd recommend?

[leevena]

thanks. do you have a software program you'd recommend?

There are a couple of things you can do. First, ask your health plan broker if he has one for you. These are relatively cheap and many brokers give them to clients for free. What I like about them is that they contain everything; background information, letters, billing, etc. A second option, which is less desireable, is to use a billing software that you can purchase at any software store.

[oriecat]

thanks oriecat. how do you reflect that payment schedule in the cobra notice?

I don't see why you would need to do that. The cobra notice should just say that the initial payment is due within 45 days of the election and needs to bring all retro premiums up to date. You can't set out the schedule, because you don't know what day of the 60 the person will make their election.

[Guest freeh]

thanks oriecat. how do you reflect that payment schedule in the cobra notice?

I don't see why you would need to do that. The cobra notice should just say that the initial payment is due within 45 days of the election and needs to bring all retro premiums up to date. You can't set out the schedule, because you don't know what day of the 60 the person will make their election.

makes sense. thank you.

i have another question- do you send separate notices to employee and separate to dependents?