As we enter the Fourth Quarter a vast number of companies will be working with carriers and brokers to get their Annual Enrollment plans finalized before open enrollment. Before all that can happen however, employers must first assess their current benefit packages and partnerships that are in place to determine whether they will be staying with the status quo or shopping around.
One aspect that is often overlooked during this process that can come back to haunt an HR department is what to do with their COBRA administration. All too often companies will switch their COBRA vendor just because they switched brokers or carriers during renewal and were advised to do so. This can be a costly mistake. As your company does its due diligence on what broker they should enlist and what carriers they go with, they should do the same when it comes to a COBRA administrator. Instead of staying with your current COBRA TPA (third party administrator) out of convenience, or blindly switching to a TPA that is favored by your new broker, you should decide independently what is best for your company.
Reasons Employers Outsource Benefits Administration
Some things to consider:
Are you satisfied with your current COBRA administration? Do you feel confident that they are helping your company stay compliant? When you try to contact them, can you get through and do they respond in a timely matter? Are they knowledgeable on the COBRA law and best practices? How can they improve their service, and will they?
What are the costs? As with most things in life it’s not always black or white. A TPA might have the lowest monthly fees but they could subsidize that with setup fees, renewal fees, or hidden miscellaneous fees. I think we’ve all been there before, you go with the service or product that is advertised as the cheapest only to find out later that it certainly wasn’t (cough* cell phone providers). It’s always important to read the fine print to make sure before you’re surprised by an invoice. There’s a lot of work that goes into getting set up with a new COBRA admin; you need to sign a service agreement, provide the plans and rates, learn the system, provide employee and current COBRA enrollee information, set up your accounts receivables, etc. It’s not one of those things that is easy to walk away from a couple months in after you realize the service or costs isn’t what you were sold. TPAs know that too. They will tell you what you want to hear just to get you in the door, hoping that the hassle to leave outweighs conceding to stay.
Be wary of “free” COBRA administration. As the saying goes, if something is too good to be true, it probably is. How long is the service free for, one year? 2 years? Are they charging you more on the backend for another service? Are they going above and beyond to make sure your company is staying in compliance, taking responsibility when issues arise, and providing exceptional customer service? Inadequate COBRA administration can lead to hefty fines from both the IRS and the Department of Labor, not to mention lawsuits. Is saving a couple hundred annually worth the risk of shelling out thousands?
It’s okay to question your broker. In fact, you should. There’s obvious reasons to enlist the services of a broker. They handle a lot the nitty gritty on the behalf of your HR Department, so that your company’s HR doesn’t have to. They are specialist who service a great value. That being said, they are a businesses too. Which means, like any business, they too are trying to increase their bottom dollar – as they should - but that might not always be in your company’s best interest. The truth is there’s a number of COBRA admins who pay brokers a commission for bringing them business. So while going with a certain COBRA admin might benefit your broker, that doesn’t mean it’s the best option for your company. There’s also brokers who have developed a relationship, or partnership if you will, with a COBRA admin that they trust, which is certainly not a bad thing. But again, just because your broker plays “favorites” with a COBRA TPA doesn’t necessarily mean your company should be tied to those preferences. The bottom line is your broker is there to ease a burden for your company but their TPA recommendations shouldn’t be absolute. Every company looking to outsource their COBRA administration should take the time to independently research the best options available for their company.
Whether you're a current CobraHelp client or a prospective client, these are all things your company’s HR department should be asking to ensure a smooth transition into next year's benefits. Ask us, ask your broker, ask our competitors. Do your due diligence now and I assure you it will save you a lot of time and money down the road.
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