Monday, March 10, 2008

Issues on COBRA and Dependent Eligibility Audits

According to California law, employees are entitled to certain benefits which employers normally provide to their workers. To ensure that these benefits will be rightfully awarded to employees at the same time protect their rights, the state employee benefits law was created.
Included among these benefits is the health care coverage for workers and their dependents, which is specifically provided under the state’s Consolidated Omnibus Budget Reconciliation Act of 1985 () (COBRA).
But reading the article, ”Employers Are Taking Steps to Reduce Costs Associated with Employee Benefits”, posted on November 29, 2007, contradicts nearly everything the law says. This article is about the practice of some employers who terminate medical coverage for worker’s dependents unless they can show proof of qualification to the benefit.
According to the article, many employers have started conducting so-called ‘dependent eligibility audits’, wherein employees are required to produce proof that their spouses and children qualify for medical benefits. If they fail, coverage for the worker’s dependents is terminated.
While the cost of providing this benefit may have increased in recent years, it is not reasonable enough to deprive workers of this vital benefit. The intention behind establishing this ‘audits’ may be good, as it had found out that 15 percent of those claimed as dependents are not actually entitled to coverage. But on the whole, more workers need the benefits than those few who try to cheat the system.
But under COBRA, these employers must “provide an employee and the employee's spouse or dependents (if covered) with notice of the right to continue coverage if the employee's job is terminated, the marriage is terminated, or a dependent child ceases to be a dependent under the terms of the plan.”
Clearly, the COBRA provision said, “The covered individual can elect to continue, for a limited period, the coverage that he or she had before the termination. The employer can require that the covered individual pay up to 102 percent of the cost of coverage.”
In addition to this, state statutes and regulations mandate California employers who offer group health insurance, health maintenance coverage, or group life insurance to comply with these laws. And usually the employer's plans are covered by both California laws and ERISA which may overlap, and even contradict each other. In many cases the federal law preempts state regulation.
The California laws regulating group health plans are similar to ERISA in a way that both establish minimum standards for coverage, limitations on cancellation and conversion, and procedures to follow upon termination of employment
In the face of all this confusion, will a final decision on the matter be forthcoming?