COBRA & Health Insurance

COBRA Q&A Series 3: Retroactive Premium Rate Changes

Posted on November 19, 2007. Filed under: COBRA & Health Insurance |

Today’s question for my COBRA Q&A Series involves “back billing” or making a retroactive change to a QB’s premium rates.  As always with this series, my goal with these posts is to create something of a “knowledge base” over time with these posts, but please always keep in mind when reading these that I am not an attorney, and I am not providing legal advice.  If you have a legal question concerning COBRA, HIPAA, USERRAFMLA, or any other ERISA matter, you should consult an attorney who specializes in these areas of law.  Finally, if you’d like a basic overview of COBRA with some links on where to find more official information, please see my earlier post here, and if you’d like to see other posts in this series visit the COBRA Q&A Series index page here.


I think I remember an earlier conversation where you said that when you were running your COBRA TPA you always provided 30-day advance notice to COBRA QBs when their premiums were going to change, and that this is why you provide both an “effective date” and a “billing date” for new rate periods in COBRApoint.  Will you please explain this to me again?  I understand why back billing is questionable, but I have a few agents who disagree, and I’d like to understand this better.


This is a very real world question.  COBRA administrators across the country routinely complain that their employer clients are often extremely late in notifying their COBRA administrators of new plan rates for new plan years.  Since this question has two components — “what can COBRApoint accommodate” and “what would you do in this situation and why,” I’ll try to break my answer up into two parts (Ed Note — I decided not to include the COBRApoint specific part of this answer in this post, but if you’d like the full answer just send me an email.  Naturally COBRApoint can accommodate both proactive and retroactive rate changes even though we believe strongly in proactive changes ourselves).  I’ll tell you what we would do from our experience, but since this question gets into determination periods vs. plan years vs. policy years and other fun items, I’d recommend that you talk to counsel before determining your own firm policy.

What would we do when we were running our COBRA TPA in this scenario?

When we were running our COBRA TPA, we believed that the EBSA (within the DOL) advised us clearly that we needed to provide 30-day advance written notice to QBs of any changes to their premiums when these premiums resulted from a change in a plan’s rates (as opposed to a change because the QB asked to drop a plan, change coverage levels, drop a dependent from a plan, etc.).  We also believed that the COBRA regs were clear in stating that plan rates must be “fixed in advance” of each annual determination period (the annual 12-month period during which COBRA premium rates must be fixed and cannot be changed).  Since our employer clients typically set their determination periods to be the same as their plan years, we clearly advised our clients that (a) they needed to get us their new rates for a new plan year / determination period at least 30 days in advance of the new plan year, or (b) if they failed to do so they would need to subsidize any difference in rates for the period of time between the start of the new plan year and the date on which we would apply the new rates to any existing QBs (which would be at least 30 days after we were notified of the new rates to allow us to properly notify the QBs).

The “agents” you mention could be relying upon the part of the COBRA regs which clearly states that you may increase a QB’s premium during a determination period if the QB is not currently paying the maximum rate plus the 2% administration fee.  In other words, the employer set the new rates in advance of the determination period, and just because they didn’t tell you (their COBRA administrator) about the new plan rates until after the start of the new plan year / determination period, the QBs should still be required to pay these new rates.  We never disputed this point.  We did change rates when we received them, but on the advice of EBSA we didn’t apply the new rates until the first of the month after 30 days from the date we notified the QB of the change in rates.  We never applied a retroactive rate increase to a QB.

Again, this is an issue you may want to take to the EBSA/DOL yourself or consult counsel.  One solution we have seen work in some cases is to off-set the determination period and the plan year.  In other words, if a client has a plan year which starts January 1 each year, but they routinely fail to get you the new rates until December 30, have their determination period start February 1.  The downside to this is that since rates typically go up each year, the client will by default be subsidizing the difference between the old rates and the new rates for all QBs during the off-set period.  You also run the risk of an employer discontinuing a plan at the end of a plan year.  The better solution is to have the employer run their open enrollment period a little earlier to ensure they have time to get you new rates at least 30 days before the start of the new plan year.

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COBRA Q&A Series 2: Incorrect Election Notice

Posted on November 15, 2007. Filed under: COBRA & Health Insurance |

In this next installment of my COBRA Q&A Series we’ll look at a question involving an incorrect COBRA Election Notice (also known as a COBRA Specific Rights Notice).  As always with this series, my goal with these posts is to create something of a “knowledge base” over time with these posts, but please always keep in mind when reading these that I am not an attorney, and I am not providing legal advice.  If you have a legal question concerning COBRA, HIPAA, USERRAFMLA, or any other ERISA matter, you should consult an attorney who specializes in these areas of law.  Finally, if you’d like a basic overview of COBRA with some links on where to find more official information, please see my earlier post here, and if you’d like to see other posts in this series visit the COBRA Q&A Series index page here.


We have a question about how best to update a QB’s plans in COBRApoint properly.  The QB in question is [John Doe] for our client [ABC Company].  When [ABC Company] notified us of [John Doe’s] Qualifying Event, they told us he was on [Medical Plan A].  We sent him his COBRA Election Notice, and he responded by electing [Medical Plan A], and he included payment for his first month of coverage.  We have since learned from [ABC Company] that he was never on [Medical Plan A] as an employee.  He was on [Medical Plan B].  If we simply drop [Medical Plan A] from his record as of his First Day of COBRA and add [Medical Plan B] as of his First Day of COBRA, will COBRApoint accurately reapply the premium he has paid (note that the premiums for [Medical Plan A] and [Medical Plan B] are different)?  Alternatively, if you were in this position, would you start over and send [John Doe] a new Election Notice?  How would this action affect us given the regs’ requirement that we send the Election Notice in a timely manner after receiving notice from the employer [plan administrator] of the Qualifying Event.


Yes, and yes.  Yes, if you drop the QB’s incorrect plan as of his First Day of COBRA and add the correct plan as of the First Day of COBRA, COBRApoint will “unallocate” the QB’s payment(s) to date from the incorrect plan premium(s) and reallocate the payment(s) to the new plan’s premium(s).  If you have already remitted premium payments to the client, COBRApoint will apply remittance adjustments if necessary to your next remittance period’s remittance report.  This is standard anytime you drop and add plans from a QB record. 

More importantly, in this scenario, yes, we also believe from our experience that the best course of action is to send the QB a brand new Election Noticesince the original notice was incorrect — the QB was not entitled to elect an incorrect plan and needs to be properly informed about the plan(s) he is eligible to elect.  In fact, any time you drop or add a plan as of the First Day of COBRA when you have already generated an Election Notice (Specific Rights Letter), COBRApoint will automatically regenerate a new Election Notice and restart the QB’s Election Period.

In addition, we’d encourage you to consider the following actions as well:

1.  Call the QB.  Let him know what is going on and make sure he understands the situation.
2.  Consider “terminating” the current QB record to generate a “notice of unavailability” (Termination Notice) to formally inform the QB that the COBRA rights offered under the original Election Notice are not actually available to him.  Then create a whole new QB record to generate the new Election Notice.  You should consult your legal counsel on this point.  If you choose to simply generate the new Election Notice in the original QB record, COBRApoint will maintain the history of both the original Election Notice and the new Election Notice.
3.  When we were faced with this type of scenario in the past, we also called the employer (client) to encourage the employer to subsidize any difference between the premium of the incorrect plan and the premium of the correct plan if the correct plan’s premium was higher — at least for the month or months for which the QB has already paid.  We never encountered any difficulties with this request when the employer clearly knew they had made a mistake.
4.  Attempt to ensure that the insurance carrier(s) clearly understand what is going on.  COBRApoint will automatically generate communications detailing the specific changes to the appropriate carrier, but it can’t hurt, and may save headaches and confusion later, if you make sure the carrier(s) clearly understand now.

Finally, you asked about whether this raises issues concerning your timely delivery of the Election Notice to the QB after you’ve been informed by your client of the Qualifying Event.  The 2004 DOL “final COBRA regulations” indicate that the employer has 30 days to notify you of the Qualifying Event (from the date of the event), and you have 14 days to generate and mail the Election Notice (from the date the employer notifies you).  As long as you generate and mail an Election Notice within 14 days each time the employer notifies you, we believe you are in compliance.  So, in this case, if you’re still within 44 days of the Qualifying Event (even when you learn of the correct plan), we believe that both you and your client are still in compliance when you generate the second Election Notice.  However, if greater than 44 days have passed, we think you continue to be in compliance as long as you generate each of the two Election Notices within 14 days of your notification from the employer.  The employer, however, may be out of compliance if greater than 44 days have passed.  I think it is likely that any court would find that as long as (a) the employer first notified you of the Qualifying Event within 30 days, (b) you generated an Election Notice each time within 14 days, and (c) the employer notified you immediately when they discovered the error, that both you and the employer acted in good faith throughout this process.  However, this is an issue I would strongly encourage you and your client to consult legal counsel about.  I would also again recommend the strategies of calling the QB to explain the situation and encouraging your client to subsidize any difference in plan premiums for the months for which the QB has already paid.  This will be much less painful for your client than the potential alternative (legal fees, IRS and statutory penalties, a court requiring the employer to self-insure the QB for the maximum COBRA period, etc.).

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COBRA Q&A Series 1: QBs & New Employer Plans

Posted on November 13, 2007. Filed under: COBRA & Health Insurance |

This is the first in an ongoing series of posts which I’ll add to over time as we receive interesting COBRA compliance administration questions from our customers and industry friends.  We’re unique in the US healthcare benefits administration industry in that before we built a technology and services company to serve this industry we first built and ran one of the nation’s largest third-party COBRA administrators for over 2500 employer clients.  In other words, we’ve walked a mile or so in our customers’ shoes, and our systems and services are “built by administrators for administrators.”  As a result, we regularly receive questions about how we would handle a given scenario.

In each post I’ll share the question we received and our answer.  I hope to create something of a “knowledge base” over time with these posts and may create a dedicated page to index them.  Please always keep in mind when reading these that I am not an attorney, and I am not providing legal advice.  If you have a legal question concerning COBRA, HIPAA, USERRAFMLA, or any other ERISA matter, you should consult an attorney who specializes in these areas of law.  Finally, if you’d like a basic overview of COBRA with some links on where to find more official information, please see my earlier post here.


If an employer is offering a new voluntary benefit plan to its employees (i.e. offering a voluntary vision plan for 2008 when the employer has not previously offered a vision plan), does the employer have to extend this new voluntary benefit plan to COBRA participants, too? This new benefit is not linked to or part of the medical plan in any way. It is simply a new benefit to employees. Since the COBRA participants did not have vision coverage on the day before their qualifying events, we don’t think we should have to offer vision to the COBRA participants, but we’re having trouble confirming this in the regs.


You are correct that the COBRA regs provide a COBRA Qualified Beneficiary (“QB”) the opportunity to elect to continue coverage under the plan(s) they held on the day before their COBRA Qualifying Event.  In other words, if an employer offered both major medical and dental plans for 2007, and an employee was only enrolled in the major medical plan, when the employee becomes a COBRA QB he/she would not have the option to enroll in dental at that time.  A QB can only initially elect to continue those plans he/she held prior to the qualifying event.

However, the COBRA regs also state that a QB must be treated the same as a “similarly situated active employee.”  The regs also state that they apply to any group health benefit sponsored by the employer (so whether or not the plan is voluntary doesn’t change whether or not COBRA applies).  During annual open enrollment, if your active employees are given the option to enroll in new/different plans, then, if we were administering COBRA for you, we would offer this same option to your COBRA QBs.  We would ask you to send the same open enrollment information to your COBRA QBs which you provide to your active employees and allow them to select from the same benefit plan options.  So, in this specific case, yes, we would offer the COBRA QBs the right to enroll in this new vision plan for 2008 if they so choose.

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COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)

Posted on November 9, 2007. Filed under: COBRA & Health Insurance |

Why am I writing a post about this law? 

COBRApoint (our suite of enterprise SaaS portal applications) empowers employers and third-party administrators (including insurance carriers, administrative service organizations, human resources outsourcers, professional employer organizations, etc.) to administer COBRA compliance and other forms of health insurance continuation such as for retirees.  Combined, COBRA continuants and retirees in the US pay over $50 billion annually in health insurance premiums to their former employers to remain on the employer’s health insurance plans.  Because our customers know that we built and ran one of the nation’s largest third-party administrators of COBRA compliance for over 2500 employers before building COBRApoint, it is not unusual for customers to contact us to get our opinion on how they might handle interesting situations which arise.  I plan on starting an ongoing series of posts about some of these compliance administration questions, though please remember that I am not an attorney and I am not offering legal advice.  So that I don’t have to explain COBRA each time, I’m creating this post as a reference point for any readers who aren’t familiar with the law.

I will attempt to provide a brief summary of COBRA below, but for more official information, you may want to check out the US Department of Labor COBRA Fact Sheet, COBRA FAQ, or download their PDF entitled, “An Employee’s Guide to Health Benefits Under COBRA.”  Employers and administrators may want to purchase a copy of the EBIA’s COBRA: The Developing Law manual which may be the best and most complete source of information available.

COBRA Overview

The Consolidated Omnibus Budget Reconciliation Act of 1985 was passed on April 7, 1986.  Responsibility for enforcing the law is shared between the Department of Labor and the Internal Revenue Service.  The regulations are periodically updated by the IRS and DOL, and much of the minutia for how to legally administer compliance is contained in continually evolving case law.

The essence of COBRA is that it requires employers with 20 or more employees who provide a group health plan to enable certain former employees and their dependents to remain on the employer’s group health plan for a limited period of time when they would have otherwise had their coverage terminated.  To be eligible for COBRA, an employee or dependent must have experienced a “qualifying event” (i.e. termination, reduction in hours, death of the employee, divorce from the employee, etc.) AND experienced a “loss of coverage” as a direct result of the qualifying event.  A person who experiences a qualifying event is known as a “qualified beneficiary.”

The length of COBRA continuation varies based on the type of qualifying event.  “Employee events” like termination and reduction in hours make a qualified beneficiary and his/her dependents eligible for an 18-month continuation period.  “Dependent events” like death or divorce make a qualified beneficiary and his/her dependents eligible for a 36-month continuation period.  As with almost any law, there are of course exceptions, and in this case things like a “qualified disability,” a “second qualifying event,” or a leave to perform military service under USERRA may extend the length of continuation.

In most cases, qualified beneficiaries are required to reimburse the employer for the entire cost of their monthly health insurance premiums at group rates plus a two-percent administration fee.  Premiums are usually due monthly, and a qualified beneficiary must make timely premium payments to continue receiving coverage.  Recent statistics indicate that about 11 million Americans experience “qualifying events” each year, and almost 5 million Americans pay for and receive COBRA continuation benefits each year.

Administering COBRA compliance can be frustrating for many employers.  Some sources claim that the IRS and/or DOL have estimated that as high as 90% of employers are out of compliance.  Note that even if an employer outsources their compliance administration to a third-party, the employer (or “plan administrator”) is still where the buck stops for compliance responsibility.  Administering COBRA compliance is not only challenging given the many complexities and gray areas in the regs and case law, but it is also burdensome on the employer requiring timely communication with the qualified beneficiary (lots of mail), tracking dates closely, processing individual premium payments, communicating with insurance carriers, generation and reconciliation of reports and carrier bills, etc.  While the regs state that a COBRA qualified beneficiary must be treated equally to active employees, the work required to accommodate the COBRA participants is much greater.

Finally, since I haven’t even really scratched the surface of COBRA in this post, I’ll pile on and also add that 43 states so far have enacted laws which either extend the scope or duration of COBRA in certain circumstances or which place a COBRA-like obligation on employers with 2-19 employees.  These state laws which extend COBRA are often referred to as “state continuation” laws, and the state laws which apply to employers with 2-19 employees are often referred to as “mini-COBRA” laws.

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The Real Motivation for Microsoft HealthVault & Google Health?

Posted on October 31, 2007. Filed under: COBRA & Health Insurance |

I think I must be simple minded. 

Since Microsoft launched its HealthVault beta on October 4, I’ve had no trouble finding opinions on whether or not the service is viable.  A representative sampling can be found here, here, here, here, here, and here though a simple searchwill return many, many more.  By the way, did that last one actually suggest that the potential of private health information “leaking out” of HealthVault might be a good thing since the threat of this might motivate people to live healthier lives?

Similarly, Google and other traditional IT powerhouses who are not usually identified with healthcare IT are apparently planning their own entries into this market and have been for some time.  Many people have written about this too

The central element of the debate seems to focus on privacy and security and whether or not John Q. Public will (a) trust the security and privacy settings of a service like this and (b) be self-motivated to spend the time to enter all of their own historical private health information.  The privacy and security questions are certainly reasonable today.  I know this first hand as a provider of a SaaS application for administering healthcare benefits which includes merchant capture of online payment of insurance premiums.  The need for maintaining security,  ensuring privacy, and complying with the HIPAA and PCI regs/rules/standards play a huge role in many of our decisions — impacting our application and database architecture, our code, our data center architecture, our daily data center operations, our customer support operations, and more.

Is it possible though that Microsoft, Google, et al. don’t really care whether or not John Q today trusts them enough and is self-motivated enough to use their system(s) right now?  Is it possible that they have a different motivator?

If you’ve not been paying attention to the 2008 US Presidential Race, a few minutes on will show you that many Americans seem to think that healthcare reform is a critical issue in this presidential election.  In one of my earlier posts, I also mentioned that one of our potential capital partners recently asked me to review and discuss the healthcare reform position papers of each of the major presidential candidates.  Clinton’s plan for example says the largest savings in her plan will come from “modernization,” and she sites a RAND (R. Hilletad et. al.) 2005 study titled “Can Electronic Medical Record Systems Transform Health Care? Potential Health Benefits,”which she says claims that improving healthcare IT can save Americans $77 billion annually.  If we look at Obama’s plan, one of his primary points is “Lowering Costs Through Investment in Electronic Health Information Technology Systems.” It goes on to say “Obama will invest $10 billion a year over the next five years to move the U.S. health care system to broad adoption of  standards-based electronic health information systems, including electronic health records.”  A major tenant of Edwards’ plan says it will “Improve Productivity with Information Technology”  Again, the first concept in this section of Edwards’ plan is “Adopt Electronic Medical Records.”  Interestingly, Edwards sites the same RAND study as Clinton, though he says this same study says that, “Savings from electronic records could be as great as $160 billion a year.” 

Here’s the point, if a Democrat is elected president in 2008, each of the major candidates claim that the #1 cost saving measure they hope to implement is a universal electronic medical record.

Microsoft and Google won’t need for John Q. Public to willingly choose to use their system if the US government decides that they get to play a part in implementing a universal electronic medical record.  If we look back just a couple years to the UK’s National Programme for IT in the National Health Service, Microsoft and Google were left out of one of the all time largest IT deals.  The original cost estimate for this project was 2.3 billion GBP.  This estimate has officially been updated to 12.4 billion GBP, but rumors apparently have some estimates as high as 20 billion GBP (that’s about $40 billion USD).  The companies that got to play in the UK deal were traditional Healthcare IT providers like Cerner and IDX and large systems integrators.  If Obama will publicly admit while running for president that he’s prepared to spend $50 billion to implement a universal electronic medical record, we can be pretty sure the actual cost will be much higher.  I think Microsoft and Google are rushing to get systems to market as soon as they can so they can attempt to play in what may be the mother of all IT deals.

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SaaS Powered BPO

Posted on October 24, 2007. Filed under: COBRA & Health Insurance, SaaS Technologies |

Jeff Kaplan writes an insightful blog on trends in IT services with a strong focus on SaaS technologies which I’ve subscribed to for some time.  This morning I found myself dancing a little jig when I discovered his most recent post “SaaS and Business Processing Outsourcing Converging,” because this is exactly what we’re doing at COCO Development.  I’ve touched on our business model in some of my previous posts, but I’d like to focus here specifically on how and why we’ve built our company to leverage a SaaS delivered application to provide business process outsourcing (BPO) services for our customers.


Every US employer with 20 or more employees who sponsors a group health plan must comply with COBRA.  The law impacts about 650,000 US employers and their greater than 90 million employees.  Essentially, COBRA allows employees or their dependents who lose their health insurance due to one of several qualifying events to continue to remain on the employer’s group health plan for an extended period of time.  Because of (a) the complexity of the regulations, (b) the need to collect monthly premium payments from COBRA continuants, and (c) the burden of communicating regularly with the COBRA continuants, approximately 72% of employers outsource their COBRA compliance administration to a third-party administrator (TPA).  For the TPA, however, these challenges still exist, and are multiplied as the TPA tries to scale their business.  This is why no single COBRA TPA currently has a greater than 4% market share.  We know this from first hand experience, as our founder and CEO, John Jenkins, built the nation’s largest independent COBRA administrator, COBRA Outsourcing Company, before selling COBRA Outsourcing and founding COCO Development to revolutionize this market.

The Problem

We know from personal experience the pains in trying to scale a COBRA administration business. 

(1)The incumbent technology “solutions” on the market are outdated client/server systems with either (a) no web portal at all or (b) a kluged browser based GUI built on top of a 15 to 2o year old legacy system.  This means the bulk of the communication taking place today between the TPA and the employer and the TPA and the COBRA continuant is done by phone, fax, and email — requiring the TPA to maintain a large and costly call center and resulting in much duplication of effort and manual data entry errors.

(2)COBRA continuants pay about $24B USD per year in monthly continuation premium payments.  The vast, vast majority of these payments are made by personal check.  Furthermore, the COBRA regulations impose very specific rules governing whether payments are made in a timely manner to continue receiving coverage.  The postmark date of mailed payments is critical in determining their timeliness.  For this reason, COBRA TPAs cannot reliably depend on a traditional bank lockbox service to process these payments since no bank lockbox will integrate with the TPA’s COBRA system to check to see whether a payment is timely before depositing the check.  The result is that most COBRA TPAs hand open, hand enter, and hand endorse and deposit premium payments.

(3)Administering COBRA requires the generation and delivery of multiple pieces of formal, written communication with COBRA participants.  To date, the US courts have held that the only universally approved method for delivering this communication is via first class mail.  A fair sized TPA may generate a thousand or more letters a day, and this is with a smaller than 4% market share.  Unfortunately, the legacy COBRA systems on the market have no concept of optimizing their production of letters for use by a mail house, so most TPAs hand fold, stuff, meter, and sort their mail before hand delivering it to the post office.

SaaS Powered BPO

Communication, payment processing, and mail fulfillment — we solve all of these pain points through SaaS powered BPO services.

(1) COBRApoint is our SaaS delivered enterprise application for COBRA (and retiree)administration with unique, secure portals for the administrator, the employer, and the member (COBRA or retiree continuant).  All stakeholders have instant access to the data they need and the ability to communicate new information directly to the system of record.  Duplication of effort, manual errors, and call center volume are reduced significantly (we probably save a few trees too).

(2) COCO Payment Services provides a COBRA optimized (postmark date driven) payment processing lockbox service which is integrated directly with COBRApoint.  It is this direct integration with the SaaS system which makes the service valuable.  The fact that we can also accept credit/debit and ACH transactions through the COBRApoint Member Portal is another distinct benefit of an integrated BPO service and a SaaS application.

(3) COCO Mail Services automatically electronically delivers highly optimized letter files generated by COBRApoint directly to our mail house each business day.  In other words, when our customers perform an action in the SaaS COBRApoint system on Monday which triggers a letter, this letter is placed into the USPS mail stream on Tuesday without the customer having to do a thing.  In addition, the costs our customers pay for this service are far less than any TPA is paying currently due to economies of scale across our customer base.

So, why do we call our business model SaaS Powered BPO Services?  First, COBRApoint’s SaaS delivery model is what enables us to provide our BPO services.  If each of our customers were running their own local copy of the system behind their own firewalls, we could never efficiently provide our BPO services.  Secondly, while a web based, scalable enterprise application would revolutionize this $24B market on its own, it is our BPO services which dramatically impact our customers’ bottom line.  The efficiencies we drive through highly optimized automated processes and economies of scale empower us to provide these highly repetitive services for our customers at a fraction of the cost they are paying currently.  For these reasons, the BPO services are all our customers pay for — COBRApoint is free.

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The Thrill of the Blog

Posted on October 18, 2007. Filed under: COBRA & Health Insurance |

John (our founder & CEO) and I had a meeting this morning with a visionary insurance carrier to discuss their interest in leveraging our integrated suite of services to empower them to provide full-service COBRA administration for all of their policy holders.  Two fun, first time, results occurred for me.

First, I got to say for the first time in a conversation, “I wrote about just this topic in my blog last night.”  Secondly, they reaffirmed across the board their agreement with my post.

This carrier intends to provide COBRA compliance administration for all of their policy holders’ members’ plans — not just their own.  In other words, Carrier A will be administering COBRA for Carrier B, C, and D’s plans.  The question they asked was, “How will the COBRApoint system enable us to communicate eligibility changes to other carriers?”  Before I could stop myself, I was self-identifying myself as a blogger.

The good news (I think) is that they agreed that the only universally accepted solution we could offer today is faxes.  The better news is that they agreed that they’d be happy to work with us to begin to help us convince the carriers they’ll be communicating with to accept EDI files from us.  I hope WEDI influences the universal adoption of a common standard before we build a library of custom file formats for every carrier in the country, but if we have to build this wall one brick at a time, we will.

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Paper, People, & Universal Healthcare

Posted on October 17, 2007. Filed under: COBRA & Health Insurance |

Question:  How many people do health insurance carriers employ to manually enter data received on faxes into eligibility and claims systems?

My background is all technology.  All of my previous companies built industry agnostic middleware solutions which we sold to hardcore IT teams.  So the last two years have been a crash course for me in learning the SOPs of our customer base — insurance carriers, TPAs, and HR departments.  My learning curve of the week is related to how our system should best produce automatic eligibility notifications to insurance carriers when COBRA and retiree continuants elect continuation coverage, change plans, change dependents, terminate coverage, etc.  How the system should “best” do this is probably a misnomer, at least for now.

The “best” solution for all parties would clearly be EDI(electronic data interchange).  In other words, our COBRApoint system should automatically electronically send a file of information to a carrier, and they should have a system which automatically takes this information and updates their eligibility systems — no people and no paper.  Ideally, all carriers would accept the same file format, and all carriers would accept these electronic files for all of their clients (employers sponsoring group health plans).  Unfortunately, this isn’t the case.

If you poll our customer base about this topic, your head will start to spin.  “Carrier A wants us to manually enter these changes through their website.  Carrier B only accepts faxes.  Carrier C wants us to send changes via (hopefully encrypted) email.  Carrier D will accept EDI files, but only for our three largest clients — oh, and since one of these clients is a 5,000 to 10,000 member group and the other two are 10,000 plus, the files have to be in a different format and sent to different places.”  “O.K.,” I say, “is there one format that all carriers will accept for all clients?”  “Sure,” they say, “faxes.”  At this point I can’t help but imagine some little fax machine at Mega Insurance Company running 24 hours a day spewing out pieces of paper.  Now, I’m sure this isn’t the case, they probably have a Big Blue document management system collecting all these faxes and routing them to people, but still, how many people must it take to manually enter all this data, and how much do all these people cost, and how many manual mistakes do they make????

If you’ve paid any attention to the news surrounding the still far off 2008 US Presidential Election, you’ve no doubt seen that some flavor of healthcare reform or Universal Healthcare is a very popular topic.  In the interest of full disclosure I suppose I should admit that I have a deep-seated mistrust for any idea which suggests that we should build a government program/department to better manage something than private industry is doing.  If you don’t agree with me, just go spend an afternoon in your local DMV office.  That being said, I recently spent a delightful evening reading the position papers of all of the major candidates on this very topic at the request of one of our potential investors — and I found something I could relate to.  Most of them claim that their first order of priority would be improving the efficiency of Healthcare IT — including and perhaps most importantly how providers, members, employers, and carriers communicate.  Amen.

I would like to point out that the healthcare community, including the insurance carriers, are already working on this, and the government is involved too.  HIPAA specifically makes an attempt to encourage simplifying all of this communication.  WEDI, the Workgroup for Electronic Data Interchange (with the active participation of carriers and providers) has been working on this for years.  Their core purpose, “Improve the quality of healthcare through effective and efficient information exchange and management,” is spot on.  This page I think nicely sums up the “best” solution I’m dreaming of.  In the meantime, we’re generating lots of faxes.

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    Mark Waterstraat

    VP Sales


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