The True Price of In-house COBRA Administration

Employers with medical plans subject to COBRA continuation coverage may often consider handling administration in-house thinking it may be the most affordable option. However, some employers eventually find out that it costs them more – a lot more. It doesn’t take huge mistakes to land in legal trouble or face significant noncompliance penalties. Let’s take a look at how in-house COBRA could cost an employer far more than outsourcing.

Self-inflicted consequences

Let’s examine a relatively simple requirement and a violation that had huge financial implications for the employer. In essence, employers have a responsibility to provide eligible beneficiaries with a notice of their COBRA rights within a specific time frame after a qualifying event. Seems easy enough, right? In this example, a class action lawsuit was filed against the employer claiming that it tried to intimidate former employees into not opting into COBRA continuation coverage via language included in their notices. This resulted in a million-dollar settlement against the employer, and resources spent in litigation.

It’s these types of situations that a COBRA compliance partner can help employers avoid. In-house COBRA may seem like a cost-effective move, but it can quickly land an employer in the red if not handled with expertise. It is no wonder why COBRA is one of the most commonly outsourced HR functions.