Legal Alerts

08 May 2014

Updates in Implementing Health Care Reform – New Model COBRA Notices

On May 2, 2014, the Employee Benefits Services Administration (EBSA) of the Department of Labor (DOL) issued:

  1. a notice of proposed rulemaking for revising notices regarding continuation coverage that employers must provide their employees under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). 
  2. two model notices that employers may use to meet the Affordable Care Act (ACA) requirement that they provide COBRA notice to employees about their coverage options on the Health Insurance Marketplaces.
  3. a series of frequently asked questions (FAQs) addressing the relationship between COBRA and the ACA and other issues.

COBRA continuation coverage has been vital due to our largely employment-based health insurance system.  It has been particularly important for individuals who lost employer-sponsored coverage but were unable, because of age or a pre-existing condition, to find affordable coverage in the individual market.  With the coming of the ACA, however, coverage in the individual market may often be preferable to COBRA coverage because of premium tax credits and cost-sharing reduction payments, which are available to pay for individual market coverage through the exchanges but cannot be used to pay for COBRA coverage.

Under COBRA, group health plans must give employees a general notice of their COBRA rights within 90 days of the time the employee or spouse becomes covered.  Group health plans must also give an election notice to qualified beneficiaries informing them of their right to continuation coverage within 14 days of the plan administrator receiving notice of a “qualified event” through which the beneficiary is losing coverage.

The proposed rule provides model notices through guidance so that updating the model notices is easier.  The model general and election notices published on the EBSA website specifically state that COBRA coverage does not limit eligibility for marketplace coverage, which may be more affordable.  Group health plans are not required to use the model notices, but plans that do use the model notice are presumed to meet COBRA notice requirements. In any event, the notice must be modified if the plan is not a single employer plan.

Because some potential beneficiaries were not aware of their exchange enrollment rights, the Department of Health and Human Services  (HHS)  has established a special enrollment period. The special enrollment period allows COBRA beneficiaries in states covered by the federal exchange to drop COBRA coverage and enroll through the federal exchange until July 1, 2014.  HHS also has created a special enrollment period in the federal exchange for individuals who are insured under 2013 plans that expire during 2014.  Such individuals can apply for coverage in the federal exchanges up to 60 days before their plans terminate and may also apply up to 60 days after the plan’s renewal date. Employers should begin using the new model notices right away.  The COBRA Model General Election Notice is available here. The COBRA General Election Notice is available here. In addition, employers should be aware of the interaction between COBRA and health care reform and be on the lookout for new regulations implementing health care the ACA. 

If you have any questions about ACA compliance or any other employee benefit or executive compensation matter, please contact Dannae Delano.

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