No doubt about it: COBRA can be a major administrative and record-keeping pain for HR/benefits managers.  

Likewise, the price tag of 102% of the monthly premium puts a major financial strain on enrollees, some of whom may still be your employees interested in coverage for their children who’ve aged out of your health plan.

Short-term medical insurance is one potential COBRA alternative. If it’s the right fit, it saves you back-end administrative hassles and saves enrollees money.

Gets some people over the hump

Short-term medical is temporary coverage for 30 to 185 days (this varies by need, carrier and state).
As with COBRA, employees pick up the tab. But the premiums are about half the cost of COBRA. And payments can be made either in monthly installments or a lump sum.

From an employer standpoint, your only legal obligation is to provide a timely COBRA notice after a qualifying event. Same as always.

The (former) employee declines COBRA coverage and enrolls instead in short-term medical. Enrollees line up their own coverage, which can start as soon as the next day. Practically speaking, however, there are advantages to giving folks a little education up front.

First, relatively few employees know these plans exist.

Secondly, some carriers offer incentives (in one case, $15 per enrollment) to employers who provide referrals. This can be as simple as finding out what short-term plans are available in your area and sharing carriers’ contact info with people receiving COBRA notices.

Here’s how it works: You register upfront with the carrier and receive an ID code. Enrollees sign up for the plan on their own. If they refer to your firm’s ID code when they enroll, you collect the reward.

If you do provide a contact list for local short-term plans as a supplement to your standard COBRA notice, be careful about the wording you choose to explain the list’s purpose.

Make clear you’re providing the list for informational purposes only, and your firm doesn’t sponsor or endorse any specific plan. You also can’t recommend one plan over another.  But the recipient may want to explore these options themselves as an alternative to COBRA.

Not right for everyone

As with all insurance, short-term medical isn’t right for everyone. The ideal candidate:

• lacks the option of signing up on a spouse’s or family member’s employer plan
• has no major health problems requiring ongoing treatment (out-of-pocket claim costs are often higher)
• isn’t currently taking expensive medications, and
• hasn’t received advice from a doctor advising a medical procedure in the near future.

What employees need to ask

By educating folks up front, you’re doing yourself a favor, too.  Short-term medical plans come in all shapes and sizes, so before the employee goes this route instead of COBRA it’s important to ask:

• Does the short-term plan count as creditable coverage for HIPAA portability purposes?
• Are there pre-existing condition exclusions? And
• How do the co-pays and deductibles compare to taking COBRA through your organization’s plan?