COBRA Notice Requirements

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New Model COBRA Notices

May 22, 2014

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In general, under the Consolidated Omnibus Budget Reconciliation Act (COBRA), an individual who was covered by a group health plan on the day before the occurrence of a qualifying event (such as a termination of employment or a reduction in hours that causes loss of coverage under the plan) may be able to elect COBRA continuation coverage upon that qualifying event. Individuals with such a right are referred to as qualified beneficiaries.

Under COBRA, group health plans must provide covered employees and their families with certain notices explaining their COBRA rights. A group health plan must provide each covered employee and spouse (if any) with a written notice of COBRA rights “at the time of commencement of coverage” under the plan (general notice). A group health plan must also provide qualified beneficiaries with a notice which describes their rights to COBRA continuation coverage and how to make an election (election notice).

General Notice: The general notice must be furnished to each covered employee (and their spouse if covered under the plan) not later than the earlier of: (1) 90 days from the date on which the covered employee or spouse first becomes covered under the plan or, if later, the date on which the plan first becomes subject to the continuation coverage requirements; or (2) the date on which the administrator is required to furnish an election notice to the employee or to his or her spouse or dependent. The general notice is required to include:

• The name of the plan and the name, address, and telephone number of someone whom the employee and spouse can contact for more information on COBRA and the plan;
• A general description of the continuation coverage provided under the plan;
• An explanation of what qualified beneficiaries must do to notify the plan of qualifying events or disabilities;
• An explanation of the importance of keeping the plan administrator informed of addresses of the participants or beneficiaries; and
• A statement that the general notice does not fully describe COBRA or the plan and that more complete information is available from the plan administrator and in the plan’s summary plan description (SPD).

Election Notice: The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives notice that a qualifying event has occurred. The election notice is required to include:

• The name of the plan and the name, address, and telephone number of the plan’s COBRA administrator;
• Identification of the qualifying event;
• Identification of the qualified beneficiaries (by name or by status);
• An explanation of the qualified beneficiaries’ right to elect COBRA continuation coverage;
• The date coverage will terminate (or has terminated) if COBRA continuation coverage is not elected;
• How to elect COBRA continuation coverage;
• What will happen if COBRA continuation coverage isn’t elected or is waived;

• What COBRA continuation coverage is available, for how long, and (if it is for less than 36 months), how it can be extended for disability or second qualifying events;
• How COBRA continuation coverage might terminate early;
• Premium payment requirements, including due dates and grace periods;
• A statement of the importance of keeping the plan administrator informed of the addresses of qualified beneficiaries; and
• A statement that the election notice does not fully describe COBRA or the plan and that more information is available from the plan administrator and in the plan’s SPD.

Some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage, such as coverage that is available through the Health Insurance Marketplace (Marketplace). Qualified beneficiaries may be eligible for a premium tax credit (a tax credit to help pay for some or all of the cost of coverage in plans offered through the Marketplace) and cost-sharing reductions (amounts that lower out-of-pocket costs for deductibles, coinsurance, and copayments), and may find that Marketplace coverage is more affordable than COBRA.

The Department of Labor has model notices that plans may use to satisfy the requirement to provide the general notice and election notice under COBRA. As of May 2, 2014, these notices have been revised to help make qualified beneficiaries aware of other coverage options available in the Marketplace. In order to use these model notices properly, the plan administrator must complete them by filling in the blanks with the appropriate plan information. Use of the model notices, appropriately completed, will be considered by the Department of Labor to be good faith compliance with the notice content requirements of COBRA.

The model general notice and model election notice are available on the DOL website at www.dol.gov/ebsa/cobra.html.

EFFECT OF COBRA COVERAGE ON EXCHANGE ENROLLMENT AND SUBSIDY ELIGIBILITY

Under the ACA, individuals may only enroll in a QHP through an Exchange during the annual open enrollment period or a special enrollment period (provided under certain limited circumstances, such as marriage or birth of a child).

In addition to the annual open enrollment and special enrollment periods, the ACA provides a special enrollment period through an Exchange to an individual who is eligible for COBRA when he or she:

• Initially is eligible for COBRA due to a loss of other minimum essential coverage; and
• Has exhausted his or her COBRA coverage;

If the individual voluntarily drops coverage outside of Exchange open enrollment (and COBRA has not yet expired), he or she would not qualify for a special enrollment period. This includes individuals who lose COBRA due to nonpayment of premiums. During the next open enrollment period or when the individual’s COBRA coverage expires, the individual could enroll in coverage through an Exchange and may be eligible for subsidies.

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COBRA Notice Requirements

This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.