
Group Health Insurance Plans
A group health insurance policy makes sense now more than ever. Group health insurance can help make healthcare affordable for employees and their families while you can enjoy tax savings and additional benefits such as attracting quality talent and retaining your best employees.
Employer Advantages of Group Health Insurance Plans
Simplified Administration Through Payroll Integration

Gain efficiency and minimize data entry errors by integrating your group health plan with Paychex payroll through Paychex Flex®, our all-in-one benefits, payroll, and HR software solution. Choosing an integrated solution that eliminates redundant data entry reduces administrative costs, as well as time spent transferring data between different benefits and payroll systems.
Easy Group Insurance Plan Enrollment and Employee Self-Service

Onboarding with us is easy. We help enroll your employees, communicate with insurance carriers, initiate payroll deductions, and simplify group health plan management through our Flock Benefits Administration benefits platform within Paychex Flex. Employees can also quickly check their benefits information in real time via our secure mobile app.
Simplify Benefits Communication, Enrollment, and Administration

Employers want to ensure that employees are educated on their benefit options and can make informed decisions. As important as it is to select an advantageous and cost-effective benefits package, it’s just as important to communicate those benefits to your employees effectively. Our Flock platform has in-app tutorials, pop-up suggestions, and other communication tools to enhance your benefits communication plan.
Licensed Agents Can Help You Select a Group Health Plan

Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Point-of-Service (POS), or High Deductible Health Plan (HDHP) — which is best for your business? Our licensed agents will explain the different group health plans and show you a comparison to help you decide. We also have dedicated insurance specialists who’ll coordinate with your carrier and provide support.
Help With ACA Requirements

Our group health insurance solutions can help you meet the often complex reporting requirements of the ACA, from helping to assess coverage adequacy to forms submission to updates on rule changes.
Benefits Made Simple
Choosing and managing employee benefits can be difficult and time-consuming. Paychex Insurance Agency simplifies that process for you and your employees with an intuitive, mobile-friendly experience. Your employees can make changes, view coverage, and enroll in minutes. You can access a benefits dashboard to easily track your enrollments, customize reports, and communicate with employees all through Flock Benefits Administration within Paychex Flex®.
Enhance Your Health Benefits With Extended Plans and Services
Individual Health Insurance
If you’re not part of a group health policy or are about to lose your coverage, our licensed agents can help you choose an individual health policy that includes your dependents.
Paychex Insurance Agency, Inc. Group Health Insurance Integrations
Group health insurance plans through Paychex Insurance Agency can be bundled with payroll and other services so you can manage benefits and HR more accurately in just a few steps.
Affordable Group Health Plans for Your Employees
Group Health Insurance Administration FAQs
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What Are Group Health Insurance Plans?
What Are Group Health Insurance Plans?
A group health insurance plan is an employee benefit plan established by a business for its employees, or an organization for its members (such as a union). The plan provides health insurance for participants directly or through insurance reimbursement.
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How Many Employees Do You Need To Qualify for Group Health Insurance?
How Many Employees Do You Need To Qualify for Group Health Insurance?
At least two, including the owner; however this is subject to carrier requirements.
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What Is Included in Group Health Care Benefits?
What Is Included in Group Health Care Benefits?
A group health insurance plan covers specific medical expenses for you and your participating employees. Group dental, vision plans, and other voluntary insurance are offered separately.
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What Is the Difference Between Group Insurance and Individual Plans?
What Is the Difference Between Group Insurance and Individual Plans?
Group insurance plans cover groups of two or more people — which may include an employer, two or more employees, and their families. Individual insurance is a health plan that covers a single employee, with an option to add coverage for that employee's eligible family members. If the business consists only of a single consultant, freelancer, or sole proprietor, individual insurance may provide necessary medical coverage in a situation where group health coverage may not be available. Individual policies can also be tailored to the individual employee's needs, and employees can shop around for their ideal individual health insurance provider instead of using one chosen by their employer.
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How Do I Choose the Right Group Health Insurance for Employees?
How Do I Choose the Right Group Health Insurance for Employees?
When choosing a group health insurance plan, value and cost are among the most important factors. While health insurance costs can be a major item on your benefits budget, this and other employee benefits can go a long way toward attracting and retaining a quality workforce. Do your research, compare multiple providers, and look for factors such as:
- Insurance carrier options and plans offered by each
- A range of insurance plan options that provides the best balance of coverage and affordability
- Co-pay, prescription, hospitalization, and other additional options to the insurance plan (remember that the more coverage you choose, the higher the premium)
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Why Is Group Health Insurance Cheaper Than Individual?
Why Is Group Health Insurance Cheaper Than Individual?
With an individual health insurance policy, a covered individual pays for 100% of their own premiums. On the other hand, employers and employees can share the costs of group health insurance, with employers covering some or all of the premium costs for a single employee and their dependents. The risk is also spread across a greater number of people for group health insurance policies. This can yield lower premiums.
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Business owners need to understand the common terms used regarding the Affordable Care Act (ACA), how to make appropriate calculations, and how to comply with their ACA reporting requirements.
ACA Reporting Deadlines: Important Dates for 2023
For Tax Year 2022, applicable large employer must furnish Form 1095-C to applicable employees by March 2, 2023. The deadline for filing paper Forms 1094-C and 1095-C with the IRS is Feb. 28, 2023. The due date for electronic filing is March 31, 2023. The affordability rate for plan years beginning in 2023 is 9.12% (a decrease from 9.61% for plan years beginning in 2022).
Businesses subject to ACA tracking and reporting requirements have several deadlines to meet if they want to be in ACA compliance. There are deadlines for furnishing forms to employees and for filing forms to the IRS. The IRS permanently provided an automatic 30-day extension from the Jan. 31 due date for Applicable Large Employers (ALEs) to provide forms 1095-C to applicable employees.
The deadline for ACA filing of all paper forms with the IRS remains Feb. 28. However, the deadline is March 31, if filing electronically. The due date is the next business day if it falls on a weekend or legal holiday. It should be noted that all employers with 250 or more returns to file must do so electronically.
Who Is Required To Report Under the Affordable Care Act?
Applicable large employers (ALEs) are required to report under the Affordable Care Act. ALEs have an average of 50 or more full-time employees, including full-time equivalent employees (FTEs), during the prior year. This distinction is a key metric, since only ALEs are subject to the ACA’s Employer Shared Responsibility (ESR) provisions and must fulfill applicable ACA reporting requirements.
What Are the ACA Reporting Requirements?
Employers that meet the threshold to be considered an ALE are required to submit all the proper forms under the ACA. Failure to do so could result in potential penalties each year.
Calculating Full-Time Equivalents for ACA Reporting
To calculate your full-time equivalents, add the hours of service for all employees who worked less than an average of 30 hours a week or 130 hours a month in a given month. Count no more than 120 hours per employee per month. Then divide the total hours by 120 to get your FTE count for that month. This number is then added to the count of regular full-time employees for each month. The total number of full-time employees, including full-time equivalents for each month in the preceding calendar year divided by 12 then determines whether a business is an ALE subject to employer shared responsibility (ESR) provisions.
ACA Reporting Requirements and Health Coverage Offered to Employees
To fulfill their ACA compliance, employers that meet the ALE threshold must offer adequate and affordable health insurance coverage to full-time employees and their dependents or risk an assessment if at least one full-time employee purchases health insurance coverage from a government marketplace and receives a premium tax credit. ALEs are required to complete Forms 1094-C and 1095-C to report information about health insurance coverage offered to full-time employees and their dependents.
The ACA also provides specifics on what constitutes adequate, affordable coverage. The ACA defines affordable coverage as costing the employee no more than 9.5% (adjusted for inflation each year) of the employee's household income for the lowest cost, self-only minimum essential coverage. Plans must also meet a minimum value (MV) threshold — that is, the plan must cover at least 60% of the total allowed cost of benefits under the plan.
How To Determine Affordability?
Recognizing that it is difficult for employers to know the household income of their employees, the U.S. Department of Treasury provided for the following three safe harbors in the ESR final regulations that can be utilized to assess the affordability of an offer of coverage in lieu of using household income.
- W-2 Safe Harbor: An ALE’s offer of coverage for every month of a calendar year is considered affordable if the employee’s required contribution for the lowest cost, self-only coverage that provides MV for the calendar year does not exceed 9.5% (as adjusted) of the wages paid to the employee by the employer as reported in Box 1 of the Form W-2. Special rules apply for partial years of employment.
- Rate of Pay Safe Harbor: An ALE’s offer of coverage for a calendar month is affordable if the employee’s monthly required contribution for the lowest cost, self-only coverage that provides MV does not exceed 9.5% (as adjusted) of an amount equal to 130 hours multiplied by the lower of the employee’s hourly rate of pay as of the first day of the coverage period or the employee's lowest hourly rate of pay during the month for an hourly employee, or of the employee’s monthly salary for a non-hourly employee.
- Federal Poverty Line Safe Harbor: An ALE’s offer of coverage for a calendar month is affordable if the employee’s required contribution for the calendar month for the lowest cost, self-only coverage that provides MV does not exceed 9.5% (as adjusted) of the federal poverty line for a single individual for the calendar year divided by 12.
Keep in mind, premium incentives under a wellness program might impact the affordability calculation. COVID-19 vaccine-related premium incentives under a wellness program, as with other non-tobacco use premium incentives, are treated as not earned, whereas qualified tobacco-related wellness incentives are treated as earned. This means the impact on the employee’s required contribution will be as if the employees did not receive the COVID-19 vaccine. (Note: An FAQ issued by the U.S. Department of Labor, Health and Human Services, and Treasury provides that the COVID-19 premium incentives must meet requirements of an activity-only health-contingent wellness program.)
Example: An ALE offers coverage to full-time employees and their dependents. The employee monthly share of the lowest cost, self-only coverage is $200.
Discount: If the plan has a $50 per month premium discount for individuals who receive the COVID-19 vaccine under a wellness program, the premium discount is disregarded when determining employee required contribution regardless of whether the employee received the vaccine. The employee’s required contribution per month is $200 for ESR purposes. Whereas, if the discount is related to a tobacco cessation program, the employee’s required contribution would be $150.
Surcharge: If the plan has a $50 per month premium surcharge for individuals not receiving the vaccine, the surcharge is added to the employee required contribution regardless of whether an employee receives the vaccine. The employee’s required contribution is $250 (200 + 50) a month for ESR purposes. If the surcharge is related to a tobacco cessation program, the employee’s required contribution would be $200 for ESR purposes.
Additionally, if an employer offers a payment to an employee in lieu of enrolling in the employer's health insurance plan, this opt-out payment impacts the affordability calculation. For ESR purposes, guidance provides:
- Unconditional opt-out payments increase an employee's required contribution by the amount of the payment.
- Conditional opt-out payments do NOT increase an employee's required contribution by the amount of an opt-out payment.
Similarly, employer contributions to a Health Reimbursement Arrangement (HRA) and health flex credits under the Section 125 cafeteria plan may impact an employee’s required contribution as follows:
- HRAs: The employee required contribution is generally reduced by the amount of the employer's contribution to HRAs, as long as the employee may use the amounts to pay premiums for an eligible employer-sponsored plan; or premiums for an eligible employer-sponsored plan and also cost-sharing and/or health benefits not covered by the plan. The HRA must be integrated with an employer-sponsored health plan.
- Health Flex credits: The employee required contribution is reduced by the amount of the employer's contribution to health flex credits only if the employee is limited in using the amount for health insurance coverage or medical care expenses as defined under Internal Revenue Code §213.
Assessments for Failure to Offer Affordable and Adequate Health Insurance
If an ALE fails to offer minimum essential coverage (MEC) to at least 95% of its full-time employees and their dependents, the employer risks being assessed one type of employer shared responsibility payment (ESRP) if at least one full-time employee purchases health insurance in a government marketplace and receives a premium tax credit. The payment is $2,000 per full-time employee (adjusted each year for inflation), after excluding the first 30 full-time employees. This is a 4980H(a) assessment.
There is also a 4980H(b) assessment, which is applied if the ALE offers coverage to 95% of its full-time employees, but the coverage offered does not meet the minimum value and affordability stipulations listed above. This penalty is $3,000 per employee (adjusted each year for inflation) who received the premium tax credit provided by the IRS for individuals without access to affordable coverage.
Gathering and Submitting Data To Meet ACA Reporting Requirements
Each year, ALEs subject to ACA reporting requirements must compile data on applicable employees and submit this information to the IRS. Attention to detail with all forms and requirements is vital, since any missteps, inaccuracies, or delays in processing can result in penalties and interest.
Required ACA Forms for Reporting: Forms 1095-C and 1094-C
The first reporting requirement for ALEs is to provide a copy of Form 1095-C to every full-time employee, regardless of whether they enrolled in the company-sponsored health plan. Employers must also keep a copy of every 1095-C form to send to the IRS to fulfill ACA reporting requirements. Correctly filling out lines 14 through 16 on this form can be particularly challenging for many people.
Employers must also complete Form 1094-C, which acts as a summary for the aggregated 1095-C forms and provides helpful information to the IRS, including contact information and the employer's Employer Identification Number (EIN), the name of a contact person, and the total number of employees.
Preparing for ACA Year-End Reporting
Part of a solid preparation plan involves gathering the data needed to complete the required IRS forms in time for ACA year-end reporting. An ALE will need a variety of information, including but not limited to:
- Employer Identification Number and business contact information
- Key contact person within the company and that individual's contact information
- Total number of employees each month
- Total number of full-time employees each month
- Average hours worked by each employee each month
- Whether insurance was offered to each full-time employee
- The type of insurance coverage offered (if applicable)
- Monthly cost to each employee for the lowest-cost, self-only minimum essential coverage providing minimum value that is offered
- Individual employee names and Social Security numbers
- Proof that 95% or more of full-time employees and their dependents were offered minimum essential coverage
Submitting Your Required ACA Forms to the IRS
Once the employer completes the required forms with the proper information, they should prepare them for transmission to the IRS. As with traditional business tax returns, ACA reporting forms can be submitted electronically or via regular mail. However, employers with 250 or more Forms 1095-C are required to submit all forms electronically.
Prepare for ACA Year-End Reporting in Advance
Verifying, cataloging, and reporting accurate data takes a considerable amount of time. Starting the process early helps to avoid an unnecessary last-minute rush to gather information and can avoid costly late fees and penalties due to inaccuracies. Beginning in the third or fourth quarter of the previous calendar year, employers should begin verifying employee records with each individual employee to ensure that all personnel data is accurate and up to date. Employers should also cross-reference facts such as employee hire dates and average hours worked, in case employees are newly eligible for benefits.
Simplify ACA Compliance Through Outsourcing
Reporting is difficult and can be costly. Having an integrated solution that combines benefits, payroll, and insurance data can take much of the burden off your shoulders at reporting time.
An ACA reporting service such as the Paychex Employer Shared Responsibility Services monitors your ALE status, FTE hours, and the type and affordability of your offered coverage throughout the year*. You can also receive help with end-of-year reporting, including lines 14, 15, and 16 of Form 1095-C for each employee.
*The Coverage Adequacy Service is available only to payroll clients who receive their health and benefits (H&B) coverage through Paychex Insurance Agency or the Paychex PEO and who are not receiving Paychex Flock Benefits Administration Services.
Employees' healthcare insurance needs may vary, but most U.S. workers look to their employer to provide this important benefit. In addition to health insurance, businesses may also want to offer additional health and wellness programs to attract and retain talent. Flexible spending accounts (FSAs) and health savings accounts (HSAs) are two options that allow employees to pay for medical expenses with pre-tax dollars. When evaluating the alternative features of an FSA vs. HSA, employers should estimate employee utilization and the relative costs and benefits of each.
What Is an HSA?
An HSA is an employee-owned health savings account where pre-tax dollars may be deposited and used to pay for qualifying medical expenses. Employees may set aside a specified amount from their paycheck and divert the funds into an HSA if they participate in a qualified high-deductible health plan (HDHP). Employers may also contribute funds to an HSA. One important feature of an HSA is transferability. Because an HSA belongs to the employee, any remaining balance remains with them when they leave the company. Also, unused funds in an HSA can be rolled over from one year to the next.
What Is an FSA?
An FSA is a flexible spending account that gives employees the opportunity to contribute pre-tax dollars throughout the year and use them to pay for qualifying medical expenses. FSAs are owned by employers, who may also contribute to the account on the employee's behalf. Employees do not need to participate in a HDHP to contribute to an FSA. However, the funds are not transferrable if they leave the company. FSAs also have limitations on the amount and timing of reimbursement. If all funds are not used at the end of the year, employers may choose to provide a grace period or allow for a specific amount of unspent funds to be carried over to the following year.
Read more about the features of FSAs and HSAs.
*Please note, the discussion of FSA in this article refers specifically to Medical FSA, not Dependent Care FSA.
FSA vs. HSA Comparison Chart: How Do These Accounts Differ?
The relative benefits of FSAs vs. HSAs may make one a better choice for an employee based on their individual situation. In the midst of benefit negotiations, employees may request one type of account over the other. Businesses will want to weigh factors such as administrative costs and expected utilization before choosing to implement one or both plans.
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Which Is Better: FSA or HSA?
Although both plans offer tax savings for employees and employers, FSAs and HSAs each offer unique features and relative benefits. Depending on your employee demographics and healthcare utilization, one type of reimbursement account may work better for your business. Your choice of healthcare plan will affect your decision to offer an FSA vs. HSA. If your company does not offer a high-deductible health plan, an FSA is the only option.
Benefits of FSAs and HSAs
FSA Benefits
FSAs do not restrict the type of healthcare plan a company must offer. Also, unused funds are reverted to employers at the end of the year, or after a grace period. Employers gain tax savings related to employees' pre-tax contributions as they are not required to pay their share of Social Security tax on these amounts. In terms of employee satisfaction and retention, the small cost of administering an FSA often yields a valuable benefit for employees who choose to participate.
HSA Benefits
Offering an HSA in conjunction with an HDHP will generally yield cost savings for businesses compared to traditional health care plans, because an HDHP is a less expensive option. Like FSAs, HSAs also result in tax savings for employers. Additionally, HSAs offer potential retirement benefits to employees when unused funds are carried over and may be taxably withdrawn for nonmedical expenses when participants reach age 65.
Challenges of FSAs and HSAs
FSA Challenges
FSAs have a lower contribution limit compared to HSAs, which reduces their comparative tax savings. Unused funds generally may not be carried forward. FSAs are also managed by the employer and are subject to some of the limitations of fringe benefits programs.
HSA Challenges
HSAs are offered only to employees participating in an HDHP. This limits the type of healthcare plans you may choose to offer if your company wishes to provide access to an HSA.
Can You Offer Both an FSA and an HSA?
Companies can offer both types of plans, but participants will need to choose one over the other for medical expense reimbursements. A limited FSA plan may be offered for HSA participants wishing to set aside extra funds for dental and vision expenses not covered by an HDHP.
Choosing the Healthcare Plan That's Right for Your Business
Your choice between an FSA or HSA often comes down to the type of healthcare plans you want to provide. If you offer an HDHP, an HSA will allow for larger contributions and additional flexibility to carry over funds from year to year. If you find that an HDHP does not make sense for your employee base, sticking with a traditional healthcare plan and offering an FSA may yield better utilization and employee satisfaction. Whether you choose one type of plan, or both, FSAs and HSAs offer important benefits that will help employers and employees manage the rising cost of health care.
If you need further assistance, Paychex Employee Benefits Services is ready to help you navigate the complexity of healthcare plans. We can work with you to weigh the relative costs and benefits of the many options available.
Many employers struggle to understand the regulations governing the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA. Failure to comply with these rules can lead to significant penalties for an employer.
COBRA applies to employers with at least 20 common law employees and requires their employer-sponsored group healthcare plans to offer the option of temporary coverage continuation when it otherwise might be terminated. If your business employs 20 or more workers, take a closer look at this article that addresses some of the common questions related to COBRA requirements for employers.
What Is COBRA Coverage?
COBRA, which was originally enacted in 1986 as part of the larger Employee Retirement Income Security Act of 1974 (ERISA), offers certain employees the right to pay premiums and continue group health insurance coverage under certain circumstances. Prior to Congress passing this landmark health benefit provision, individuals who were on an employer-sponsored health plan immediately lost health insurance coverage when the qualifying employee terminated employment for any reason. This situation was further complicated when the ex-employee or a family member was ill and therefore unable to obtain new health insurance.
How Does COBRA Insurance Work?
After COBRA was enacted, employees who left an employer-sponsored plan could elect to continue health insurance coverage for a certain time period after leaving the company. This continuation of coverage is often significantly more expensive than the amount that active employees are required to pay for group health coverage, since the employer usually pays part or all of the cost of employees' coverage while they are employed. Under COBRA, the employer is no longer responsible for covering any part of this cost, and it can all be charged to the individuals directly receiving the continuation coverage. COBRA coverage is typically offered to qualifying employees for a period of 18-36 months, but an individual's eligibility for COBRA as well as the length of coverage both depend on specific qualifying events.
Is My Business Subject to COBRA?
COBRA laws generally apply to group health, dental, and vision plans offered by private employers with 20 or more employees on 50 percent of its typical business days during the preceding calendar year. When determining if COBRA applies to a business, both full-time and part-time employees count toward this number — the federal government calculates "full-time equivalent" employees, meaning the hours of two or more part-time workers will be combined to make a single full-time worker that counts toward the 20-employee threshold. Plans offered by state and local governments are also subject to COBRA; however, plans offered by the federal government and churches (within the meaning of Section 414(e) of the Internal Revenue Code) typically are not.
When Does COBRA Apply to Group Health Plans?
The law defines a group plan as "any arrangement that an employer establishes or maintains to provide employees or their families with medical care, whether it is provided through insurance, by a health maintenance organization, out of the employer's assets, or through any other means." Group health plans that do not meet this definition are not subject to COBRA, although they may be subject to certain state continuation requirements. Other group benefits, such as life insurance or disability benefits, are also not subject to COBRA. If your business employs 20 or more employees (Common Ownership of Corporations and Multi-employer Plan rules apply) and offers any kind of group health insurance, it's best to consult an expert to determine your COBRA eligibility to avoid any potential fines or penalties.
Who Is Eligible for COBRA Coverage?
Any employees who are enrolled in an eligible group health plan and meet certain qualifying event requirements may be eligible for COBRA continuation coverage. This can include:
- Full-time employees
- Part-time employees
- Spouses of eligible employees
- Dependents of eligible employees
- Retirees
Who Is Not Eligible for COBRA Coverage?
An employer's responsibility to offer COBRA coverage is not unlimited. Even if the business meets the 20-employee minimum, certain employees are not eligible for COBRA coverage based on their failure to elect a qualifying plan, their reason for termination, or other extenuating circumstances. This can include:
- Employees who are ineligible for coverage in the group plan
- Employees who declined to participate in the group health coverage
- Employees who are enrolled for benefits under Medicare
- Employees terminated for gross misconduct
Qualifying Events for COBRA Coverage
In addition to employee status and enrollment in an eligible group health plan, employees must also experience a qualifying event in order to be eligible for continuation coverage under COBRA. Generally, this will include an event that causes the employee to lose group health coverage. Examples of these events include:
- Termination for reasons other than gross misconduct
- Reduction in employee hours
- Temporary or permanent layoffs resulting in loss of benefits
Qualifying events can also extend to an employee's spouse or dependents if it results in a change in status for the entire family and affects the family's ability to maintain health coverage. COBRA may apply and provide continuation coverage whenever the spouse or dependent of a covered employee:
- Death of Covered Employee
- Gets divorced or Legal Separation
- Loses coverage because the covered employee qualifies for Medicare
- Loses coverage because the covered employee is terminated
- Dependent Child ceasing to be a Dependent
What Are My Employer Responsibilities Under COBRA?
Plan administrators have certain responsibilities to notify eligible individuals as their status changes under the law. In some cases, the employer is the plan administrator and must assume any and all of these responsibilities. If you have employees that could qualify for COBRA, you must:
- Notify the group health plan administrator of an individual's COBRA eligibility within 30 days of a qualifying event
- Provide notification about COBRA privileges to any employees who are eligible for COBRA within 44 days
- Notify beneficiaries within 14 days if COBRA coverage is denied for any reason
- Provide coverage identical to the plan the employee was enrolled in before the qualifying event if they elect to continue coverage under COBRA
There are additional employer responsibilities outlined in a detailed and specific process that must be followed, including what notices must be given, what the election process looks like, and more. For detailed information on this topic, please consult An Employer's Guide to Group Health Continuation Coverage Under COBRA.
COBRA Election Process
Once an employee experiences a qualifying event, COBRA requires group health plans to give qualifying individuals (the employee and any qualifying spouse or dependents) an election period to review the associated costs of continuing coverage and decide if they want to maintain coverage under COBRA. Once the qualifying event occurs, individuals must be given 60 days to elect or decline continuation coverage.
While the election period is the same for all individuals within a household who experienced the same qualifying event, the election process is determined on an individual basis. The employee, their spouse, and each qualifying dependent can elect or decline coverage as appropriate for their unique situation.
What Benefits Are Covered Under COBRA?
Under COBRA, the benefits provided must be identical to those provided while the qualifying individual was still employed. This coverage rule also extends to spouses and dependents of qualifying employees who may opt to continue coverage, even if the covered employee decides to seek benefits coverage elsewhere. Any qualifying individuals who continue benefits through COBRA are subject to the same co-pay, deductible, coinsurance, and minimum/maximum benefits levels as under the original group health plan.
How Long Do I Have To Provide COBRA Coverage for My Employees?
Typically, COBRA coverage will last between 18 and 36 months, depending on the qualifying event, the type of plan offered, and any state regulations that may apply. However, it's also important to note that individuals may extend COBRA coverage past the maximum period if they experience a disability or other qualifying event while under COBRA coverage. If a qualifying beneficiary is disabled, for example, they are able to extend the coverage for 11 months past the standard coverage period. Standard coverage periods for common qualifying events are:
- 18 months for termination for reasons other than gross misconduct
- 36 months when an employee enrolls in Medicare
- 36 months when coverage status changes due to divorce or legal separation
- 36 months when the covered employee passes away
In addition, some states allow for continuation coverage for a longer period than required under COBRA. Employers that are not subject to COBRA under federal guidelines may still be required to offer continuation coverage under state law. Contact your state insurance commissioner's office to determine the availability and exact length of continuation coverage required in your state.
What Is a Qualifying Event?
To qualify for COBRA, employees must quit voluntarily, be terminated for reasons unrelated to gross misconduct, or had their hours reduced to a point that they are no longer eligible for health coverage (covered spouses and dependent children may also be eligible for COBRA under these circumstances). COBRA qualifying events, listed on the U.S. Department of Labor (DOL) website, are:
- Voluntary or involuntary termination of employment for reasons other than gross misconduct
- Reduction in the number of hours of employment below plan eligibility requirements
Qualifying events for covered spouses are:
- Voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct
- Reduction in the hours worked by the covered employee below plan eligibility requirements
- Covered employees become entitled to Medicare
- Divorce or legal separation of the covered employee
- Death of the covered employee
Qualifying events for covered dependent children are:
- Loss of dependent-child status under the plan rules
- Voluntary or involuntary termination of the covered employee's employment for any reason other than gross misconduct
- Reduction in the hours worked by the covered employee below plan eligibility requirements
- Covered employees become entitled to Medicare
- Divorce or legal separation of the covered employee
- Death of the covered employee
Who Pays for COBRA Insurance?
Although employers are responsible for providing eligibility notification to qualifying individuals and making equivalent coverage available during the COBRA eligibility period, employers are not responsible for covering any part of the cost of this coverage. Employers are allowed to pass 100% of the cost of the group health plan on to the employee during the COBRA continuation period. In addition, if COBRA payments for this coverage are paid late, the employer is allowed to terminate coverage before the end of the standard COBRA eligibility period, as long as a 30-day grace period has been given.
What Fines or Fees May Apply for Non-Compliance?
Non-compliance around COBRA insurance rules can be very expensive for employers. When a COBRA notice is delinquent, the DOL can fine employers $110 a day. In addition, the IRS is authorized to levy excise tax penalties on employers for failing to correct COBRA violations in a timely manner. Penalties can be $100 per day or $2,500 per beneficiary affected by the rule violation — whichever is greater.
Employers can also be sued in civil court by any employees who were eligible for, but did not receive, COBRA continuation options. Attorney fees, monetary damages, and medical expenses related to these incidents can be in the tens or even hundreds of thousands of dollars per incident.
How Can I Choose a COBRA Plan That Is Right for My Business?
Employers should consider engaging specialists in COBRA administration to help avoid financial penalties for non-compliance and to ensure that COBRA requirements are followed in a timely manner. These specialists can also provide useful assistance in the event of an IRS or DOL audit. Since each situation is unique, it is important to fully explore all options available and choose an approach that's right for your business.