Business & Trade Associations
Membership Compliance Issues Associated With Employee Benefit Plans

The Challenge
Is there a better way to solve the member’s COBRA compliance headache?

Associations, by their very definition, are organizations whose sole purpose is to advance the well-being of the membership. As an association matures, value-added benefits evolve in response to the increased “purchasing power” of the organization. Leveraging this increased purchase power becomes a key objective of the association’s management and board of directors. A common value-added benefit, and one made even more attractive by the collective purchasing power of associations, is an employee benefit plan offering.

A particular class of employee benefit plans has become problematic for some associations. This class of benefits can be defined as those subject to federal continuation requirements known as COBRA. For example, small members who would otherwise not be subject to COBRA must comply if they obtain benefit plans via an association affiliation. Also, larger members typically demand that their association sponsored group benefit plan offer cost-effective solutions for complying with COBRA’s requirements since the open market offers these solutions.

Whether the association works through an independent employee benefit brokerage agency or has created an internal insurance agency, the challenge is the same: how to find a low-cost solution to help solve the member’s COBRA compliance obligations.

Since the inception of COBRA regulations, associations traditionally have followed three courses of action when it comes to supporting their member’s COBRA compliance efforts:

• Do nothing—this is a member/employer law.
• Contract with a company to provide turnkey, “back office” services to member customers.
• Develop an internal hybrid solution with varying levels of involvement in the administration process.

Let’s examine these in more detail:

First, association group health plans that offer nothing to support the member in their compliance efforts incur direct and significant costs. National surveys continue to reveal that COBRA claimants average 156 percent higher claim costs than active plan members. What’s more, there are soft costs associated with lost new business opportunities due to perceived inequalities between carriers that offer a COBRA solution and ones that do not. That, then, begs the question: Due to loose administration procedures, how many COBRA participants are covered under an association plan that shouldn’t be there?

Second, employing the back-office model is expensive. On average, the “per insured member capitation” rate is between $0.60 and $1.75 per month. Compounding this are the costs associated with loss of goodwill when the COBRA administration provider’s service standards slip—creating a negative experience for the member. Problems with COBRA administration often bleed on to the association because they were the driver in this business relationship.

Third, many associations have developed an internal COBRA administration unit to provide COBRA services for their members. Some associations have partnered with their carriers or administrators to handle 100 percent of the compliance process. Under this strategy, the increased liability exposure and costs to the benefit plan are very real and substantial.

The Solution
COBRApoint has developed BUSINESS IN A BOX solutions

The Benefit
Turn a cost item into a revenue source

The Technology
The power of an effective application service provider

About the Company
COCO Development, LLC

COCO Development, LLC, provides cutting-edge, business-to-business solutions that facilitate and streamline the complex tasks of managing human resource functions. All COOC Development solutions are accessible in an Application Service Provider environment. Employer customers may access tier-1 technology solutions without significant capital investments or computiong infrastructure reconfiguration

Founded in 2003, COCO Development is being recognized as a leader in innovative HR compliance process applications. Every member of the development and management team has amassed in depth technical and practical knowledge about COBRA compliance administration and instills every facet of COBRApoint with this collective knowledge. For more information, visit www.cobrapoint.com.