Is your business client struggling to navigate the Consolidated Omnibus Budget Reconciliation Act (COBRA) compliance? As a health insurance broker, you know that COBRA is a necessary benefit for your clients, but also how confusing and time-consuming it can be for your clients to manage independently.
That’s where PrestigePEO comes in with one critical distinction: we only administer COBRA for clients enrolled in our internally sponsored master medical plans. We do not provide COBRA administration for outside, carve-out, or client-sponsored plans.
Many brokers ask about this key point: if your client brings their own medical plan, they retain full COBRA responsibility. However, when enrolled in a PrestigePEO master medical plan, COBRA administration shifts entirely to us, eliminating the burden for you and your clients.Put simply: Enrollment in PrestigePEO’s master medical plan is a must to unlock the full value of COBRA as a managed service, which offers streamlined compliance, reduced liability, and hands-off administration.
In this article, you’ll learn:
- How COBRA compliance challenges impact SMBs and brokers alike.
- The value of reframing COBRA administration as a managed service.
- How working with a PEO like PrestigePEO enhances your client relationships and reduces operational risks.
Why COBRA Compliance Is a Challenge for SMBs
COBRA administration can be a daunting responsibility for many SMBs, particularly those with limited HR resources or compliance expertise. The complexities of managing COBRA administration, staying on top of changing regulations and avoiding financial penalties create challenges for business owners.
Administrative Burden
For SMBs, COBRA compliance often falls on overburdened HR departments or business owners who may not have the bandwidth to manage the required tasks. Employers must handle:
- Eligibility tracking: Ensuring that only eligible employees and dependents are offered COBRA.
- Timely notifications: Sending out notices at the right time and to the correct individuals to ensure compliance.
- Payment collection: Managing premium payments from employees opting for COBRA continuation, which can vary month-to-month.
This ongoing administrative work can overwhelm small teams who already wear multiple hats, leading to mistakes or oversights that could put the business at risk.
Legal and Regulatory Complexity
The regulatory environment surrounding COBRA is anything but simple. SMBs must navigate:
- Federal and state regulations: Both federal COBRA rules and state-specific regulations (often referred to as “mini-COBRA”) need to be adhered to, which can vary significantly.
- Timelines and deadlines: COBRA has strict timelines for notifications, elections and premium payments. Missing even a small deadline could lead to severe consequences, including lawsuits or penalties.
- Changes in legislation: Ongoing updates to federal laws (like the Affordable Care Act) can further complicate compliance, requiring SMBs to constantly stay informed about changes and adjust their practices accordingly.
Without in-house legal teams or dedicated compliance officers, many SMBs struggle to keep up with these requirements, risking costly non-compliance.
Financial Risks
Non-compliance with COBRA regulations can have serious financial consequences. These can include:
- Penalties: Employers who fail to meet COBRA requirements may face substantial fines. In some cases, businesses may be required to pay up to $100 per day per employee for non-compliance.
- Lawsuits: Employees who feel their COBRA rights have been violated could pursue legal action against the employer, potentially resulting in costly settlements or judgments.
- Insurance premiums: Improperly managing COBRA premiums or coverage could result in gaps in employee insurance, leading to financial liabilities for the business.
For SMBs with limited budgets, these financial risks can be devastating. Even small mistakes can lead to expensive consequences, making it essential for businesses to get COBRA right.
The Broker’s Role in COBRA Communication
As a health insurance broker, you play a role in bridging the gap between compliance requirements and client understanding. While many SMBs turn to their brokers for guidance, you may find that COBRA administration’s intricate rules and legalities can be difficult to explain, particularly if you’re not a compliance expert.
Some of the common challenges brokers face in COBRA communication include:
- Explaining timelines and eligibility: COBRA requires strict adherence to deadlines and detailed rules about who is eligible for coverage.
- Clarifying what constitutes a “qualifying event”: Determining what qualifies as a COBRA-triggering event can be confusing for clients.
- Understanding federal and state COBRA laws: Both federal and state regulations govern COBRA compliance, making it challenging to stay updated on changes.
- Answering administrative questions: Clients often need help with the paperwork, notifications, and payment collection processes required for COBRA compliance.
- Managing client frustration: When gaps in compliance occur, clients may become frustrated or worried about potential penalties.
These challenges take time away from your primary focus, building a stronger relationship with your clients. If COBRA compliance issues aren’t addressed correctly or efficiently, they could also lead to client dissatisfaction or even break trust, making it harder for you to retain clients.
By positioning COBRA compliance as a managed service through PrestigePEO, you can take the burden off your clients and yourself, allowing you to focus on offering more value in areas that matter most to them, while enhancing your reputation as a trusted advisor.
Positioning COBRA as a Managed Service
As a broker, one of the most valuable services you can offer your clients is positioning COBRA compliance as a managed service. Reframing COBRA as a streamlined, low-stress process helps your clients stay compliant while reducing their administrative burden. This allows you to focus on building client relationships and provide comprehensive benefits solutions.
When you partner with PrestigePEO, you can position COBRA compliance as a managed service:
1. Offer a Turnkey Solution with a PEO Partnership
Instead of letting clients scramble, simplify COBRA by leveraging PrestigePEO’s medical master plan. When clients enroll in this plan, COBRA tasks, like eligibility tracking, notices premium collection and carrier coordination, are fully handled by PrestigePEO. It’s important to note this only applies to master plan participants; brokers and SMBs choosing external or carve‑out medical plans will still retain COBRA responsibility.
2. Integrate COBRA into a Comprehensive HR Solution
You can present COBRA as part of a comprehensive employee benefits package. By bundling COBRA with other HR services, you create a streamlined solution, giving clients peace of mind knowing their compliance and administrative needs are handled.
3. Position COBRA as Risk Mitigation
COBRA compliance can feel like a burden. However, you can position it as a critical risk mitigation strategy. Your clients reduce the risk of costly fines, penalties and legal issues, keeping businesses safe and adding value to your client relationships.
4. Highlight the Cost Savings
Managing COBRA in-house is time-consuming and costly, especially for smaller businesses. By partnering with PrestigePEO, your clients gain access to cost-effective COBRA administration without needing to hire additional HR staff or invest in complex software.
5. Provide Ongoing Strategic Guidance
While PrestigePEO handles the day-to-day COBRA compliance tasks, you continue to serve as your clients’ trusted advisor. With your strategic guidance, you can help your clients understand how COBRA fits into their broader employee benefits strategy and ensure they’re optimizing their benefits offerings to meet the needs of their workforce.
By positioning COBRA as a managed service through PrestigePEO, you simplify compliance, reduce risk and deliver significant value to your clients. This allows you to focus on building stronger, long-term relationships and positioning yourself as a strategic partner in their success.
Benefits of a PEO partnership
Partnering with PrestigePEO allows you to offer your clients a streamlined COBRA experience while reinforcing your role as a trusted advisor and offering a comprehensive employee benefits solution.
1. Increased Client Confidence
With PrestigePEO managing COBRA and other compliance functions, clients trust that their obligations are met without costly mistakes. This builds confidence in both you and PrestigePEO as reliable partners.
2. Reduced Liability for You
Brokers are not compliance experts. With PrestigePEO handling COBRA administration, you can be confident that regulatory requirements are met on time. This minimizes your exposure to legal risks, providing peace of mind for both you and your clients.
3. Increased Client Retention
COBRA compliance is a pain point for SMBs. By offering a comprehensive solution through PrestigePEO, you become an indispensable partner. Clients will appreciate the simplified, reliable process, leading to stronger relationships and improved retention.
4. Streamlined COBRA Administration
With employees enrolled in PrestigePEO’s master medical plan, COBRA compliance is handled entirely by the PEO. External or carve‑out medical plans remain outside this service.
5. Competitive Differentiation
In a competitive market, brokers who work with strategic partners like PrestigePEO stand out. By offering turnkey COBRA compliance solutions, you provide comprehensive, risk-mitigating solutions that help businesses thrive.
Let PrestigePEO remove the burden of COBRA administration
COBRA administration does not have to be a compliance headache for you or your clients. As a broker, you can provide additional value by aligning with a partner who specializes in complex compliance issues. PrestigePEO helps SMBs manage every aspect of COBRA administration, allowing you to focus on building better client relationships by offering enhanced employee benefits strategies.
Learn more about our services or contact us today to speak with a member of the PrestigePEO team.
