Logistics of COBRA Outsourcing

        COBRA Administration Outsourcing


After you have decided to outsource COBRA administration and have chosen a TPA, you will enter into a contract with them. As mentioned above, it is extremely important to review the indemnification process and make sure that your company is protected from the TPA’s mistakes. After all, this is probably one of the main reasons you are outsourcing COBRA administration—to cut down on the financial risk resulting from any mistakes.

Although many TPAs are similarly priced, there are often two choices for how you can pay fees. Typically, you will either pay a flat fee per qualifying event or a monthly fee per eligible employee. Companies with low turnover will likely prefer the fee per qualifying event, whereas you might choose the monthly fee per eligible employee if you have high turnover or want to predict your COBRA administration-related spending more closely.

When outsourcing COBRA administration, you will also need to designate someone to serve as a liaison between your company and the TPA. This person will ensure that all qualifying events are communicated to the TPA, will field any complaints about the TPA from COBRA-qualified employees, and will address any other concerns or communication regarding COBRA administration.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that provides for the temporary extension of employer-sponsored group health coverage for employees and their family members (qualified beneficiaries) in certain situations. COBRA coverage is available when qualifying events occur, such as termination of employment or divorce.

Due to the complexities of the law and potentially serious consequences for mistakes or violations, many employers outsource COBRA administration to a third-party administrator (TPA).