The U.S. Department of Labor (DOL) recently issued new proposed COBRA regulations. The regulations include an updated model general notice1 and model election notice2 under the federal COBRA law.3 Use of the model notices is not mandatory, but we recommend that clients seriously consider using them.
Qualified group health plans with more than 20 employees are required to distribute a general COBRA notice within the first 90 days when an individual first becomes covered under the plan. If an employee experiences a qualifying event, a group health plan must distribute a COBRA election notice within 14 days after the plan administrator is notified of the qualifying event. The employer has 30 days after the qualifying event to provide notice of the qualifying event to the plan administrator.
Changes to the Model Notices
The DOL did not change the requirements for the general notice or the election notice. The model COBRA notices were updated to emphasize that COBRA is not the only alternative for health coverage after a participant loses coverage under an employer-provided group health plan. The notices state that an individual and his or her family may be eligible for Medicaid or may be eligible to purchase an individual plan through the health insurance marketplace established by the Affordable Care Act and that enrolling in such coverage may qualify the individual for lower costs on monthly premiums and/or lower out-of-pocket costs. The notices also state that if an individual loses his or her group health coverage, he or she may qualify for a 30-day special enrollment period for another group health plan, such as a spouse's plan. The notices direct the recipient to www.healthcare.gov for more information about the marketplace and potential tax credits for coverage.
New Notices Not Mandatory, but Recommended
Plans are not required by law to use the new model notices but plan sponsors may wish to do so because the DOL will consider use of these model notices to be good faith compliance with the COBRA notice requirements (until final regulations are issued). Plan sponsors also may wish to update their plans' general and election notices because providing continuing coverage under COBRA to former employees and their dependents is often a costly burden for both the plan and the qualified beneficiaries. Educating qualified beneficiaries about special enrollment periods in the federal marketplace, the possible availability of premium tax credits towards the cost of such coverage, as well as special enrollment periods for spouse's health insurance coverage, likely will encourage qualified beneficiaries to seek out a more cost-effective option and could lead to a decline in enrollment in COBRA coverage.