First, there was Rocky V and Die Hard 3. Now, back by popular demand, is the followup to “Employee benefit landmines,” our March article. It elicited such a great response that it only makes sense to offer several additional landmines that you probably don’t know to avoid until it’s too late.
As in the movie, Kelly’s Heroes, once you know you are in the minefield, you can work your way out. Remember, even seasoned veterans sometimes miss landmines until they explode.
Sending the initial COBRA notification letter in the proper time and the proper way
COBRA no longer has the scare factor it once had. In the early days, it was like whispering the name Lord Voldemort. COBRA isn’t dead. In fact, many HR managers are administering COBRA the wrong way.
The most common question missed when reviewing your COBRA administration issues is, “When and how do you send the first COBRA notification to an employee?”
Some people answer, “When an employee leaves,” but that would be wrong. The first time an employee should receive the notice is when he or she enrolls in benefits that are subject to COBRA.
You are required to send the notice of rights to the employee’s home, addressed to those enrolled, using first class mail. Many people fail because they try to do more than the law indicates. All other formats may sound better, but may get you into deep trouble.
Working on an executive’s claim problem without being in full HIPAA compliance
Employers realize that HIPAA is here to stay and have made arrangements to keep in compliance. Most employers have chosen not to be in full compliance because they are not assisting employees with claim problems.
However, some HR managers are still assisting top executives. Unless the top executive is the owner and the only person you are assisting, you are playing with fire.
An owner’s spouse could file a complaint that could cause a liability for the company because you never know if divorce is in the cards. In addition, top executives are sometimes replaced.
The simple answer is that if you are not in full compliance, you need to tell the boss why you can’t assist with his or her claim problem, or you need to get into full compliance. If your agent is assisting employees with claim problems, you still have to confirm your agent is in HIPAA compliance.
Auditing your payroll and first month’s bill after open enrollment
Most people audit their bills, but you need to audit it against your payroll deductions. Many times, mistakes are discovered months — and sometimes years — after the change.
Don’t wait until your next change. Audit payroll right away to prevent any problems from getting worse.
Miscalculating STD and LTD premiums
We see this mistake often. It is most common on self-administered billing. Although self-administered anything has value, it usually comes with liabilities. The consequences of this mistake impact deductions, and worse yet, coverage.
If you have been paying an incorrect premium, the benefit to the employee may be in jeopardy of being based on that incorrect premium. Here are the formulas and examples:
- LTD (Long Term Disability) — Monthly gross salary / $100 x rate = monthly premium. $24,000 annual salary / 12 = $2,000 monthly gross salary. $2,000 / $100 X $0.25 (made up rate) = $5 in monthly premium.
- STD (Short Term Disability) — STD can be the tricky because it is based on weekly benefit. Weekly wages x benefit percentage / $10 x rate = monthly premium. $24,000 annual salary / 52 weeks x 60 percent (benefit percentages can be different) / $10 x $0.25 (made up rate) = $6.92 monthly premium.
Please keep in mind that for both LTD and STD, there is usually a maximum premium based on the maximum insurable salary based on your policy limits. Bruce Bishop ([email protected]) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach Bishop at (770) 425-6700 or (800) 874-2244, ext. 205.
