Since January 1, 2014, individuals and employees have been able to purchase medical health insurance coverage through federal and state exchanges (the “Exchanges”). Questions have remained, however, as to how health coverage offered by employers pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) interacts with the coverage options offered through the Exchanges. Recent guidance seeks to address these questions, revising the model COBRA notices to provide more detail about the coverage options under the Exchanges. Given the increased cost to employers of providing COBRA coverage, employers should take action to advise employees and their dependents of the availability and potential cost savings of transitioning to the Exchanges instead of COBRA.
Revised COBRA and CHIPRA Notices
The COBRA regulations require employers to provide two notices advising employees and beneficiaries of their COBRA rights. A general notice must be provided when the employee first becomes covered by an employer-sponsored health plan. A COBRA election notice must be provided to qualifying beneficiaries within 14 days after the plan administrator receives notice of a “qualifying event” such as termination of employment, birth or adoption of a child, marriage or divorce. The regulations specify content and provide a model for each notice. Use of the model notices is not mandatory. However, when appropriately completed by an employer, use of the model notices provides a “safe harbor” for compliance with the COBRA notice content requirements.
In May 2013, the U.S. Department of Labor (“DOL”) revised the model election notice to provide employees with information about Exchange coverage options (as we previously discussed here in June 2013). In its most recent guidance, the DOL further (and rather extensively) revised the model election notice and the general notice to include more detail about the Exchange coverage alternative.
The DOL also issued proposed COBRA regulations that change the way COBRA model notices will be updated in the future. Instead of amending its regulations to reflect changes to the model notices, the DOL will simply update the model notices on its website. This change will allow the DOL to update the notices more frequently and reduce any confusion as to where to obtain the most recent version of the model notice. The proposed regulations provide that appropriate use of the model notices will constitute good faith compliance with the notice content requirements until the regulations are finalized.
Substantial revisions were made to the election notice that focus on the interaction between COBRA and the Exchanges. Interestingly, none of the revised content is content required to be disclosed under the COBRA regulations. Notable revisions include:
Additional information about how to enroll in coverage offered on the Exchanges, what the Exchanges offer, and updated contact information to obtain additional information about the Exchanges.
Explanation of non-COBRA coverage options that may be more affordable, including enrolling in coverage on the Exchanges, Medicaid, or other group health plan coverage (such as a spouse’s plan).
Information regarding the how enrolling in COBRA impacts the ability to switch to coverage offered on the Exchanges.
Discussion of factors to be considered when choosing coverage following the loss of coverage under an employer sponsored health plan. Those factors include:
The cost of premiums;
Availability of current health care providers, prescription drug coverage, and service areas covered by the qualifying beneficiary’s new coverage network; and
Other cost-sharing factors such as copayments, deductibles or coinsurance.
The DOL urges individuals who receive severance packages that include employer-sponsored COBRA coverage to contact the DOL to discuss their options. While not discussed in the model notice, the expiration of employer-subsidized COBRA is not a “qualifying event” that would allow an individual a special enrollment period on the Exchanges outside an open enrollment period.1 Individuals whose employer-sponsored COBRA subsidy expires mid-year may have to wait until the next open enrollment period to obtain coverage through an Exchange or other group health plan.
The revised general notice has been modified to include information about an individual’s right to enroll in coverage offered on the Exchanges, as well as a disclaimer that such coverage may be more affordable than COBRA. Similar changes have been made to the required notice under the Children’s Health Insurance Program Reauthorization Act (“CHIPRA”).
Next Steps for Employers
Update COBRA general and election notices and CHIPRA notice
King & Spalding recommends that employers update their COBRA notices as soon as administratively possible to include information about the Exchanges, despite the fact that the COBRA regulations do not require employers to communicate the new information about the Exchanges. The benefit of updating employer notices by using the new model notices is two-fold: (1) Using the model notices provides a “safe harbor” for satisfying the notice content regulations and (2) Updating the notices provides an opportunity to advise individuals of the availability of other healthcare coverage options, which could provide a cost savings for employers and former employees alike.
Update other participant communications
King & Spalding also recommends that employers review and update other participant communications that may address healthcare coverage, including summary plan descriptions and enrollment materials to provide information on the Exchanges and other healthcare options.
King & Spalding is happy to assist employers in updating notices and participant communications.
1 The special enrollment rules for the Exchanges generally mirror the COBRA eligibility “qualifying event” provisions as discussed above. That is, if an individual experiences a qualifying event such as a termination of employment or marriage, the individual has 60 days to enroll in Exchange coverage. The Exchange enrollment rules also provide for a special enrollment right when COBRA has been exhausted. See 45 CFR 155.420(d)(1).
Authors, Eleanor Banister, Atlanta, +1 404 572 4930, firstname.lastname@example.org and Ryan Gorman, Atlanta, +1 404 572 4609, email@example.com.