June 4, 2014 – Recent COBRA Developments Related to Health Care Reform
Last month, federal regulators released two pieces of guidance related to COBRA continuation coverage. Both pieces of guidance relate to the interaction between COBRA coverage and the availability of coverage through public insurance exchanges. One is time sensitive and temporary; the other reflects a long term change to notification requirements regarding COBRA.
New Special Enrollment Opportunity for Certain Persons on COBRA. CMS released guidance offering a one-time, special enrollment opportunity for certain COBRA beneficiaries. Normally, a person losing employer-sponsored coverage can enroll in a qualified health plan (QHP) through a public exchange instead of electing COBRA coverage. Concerned that COBRA beneficiaries may have not received sufficient information about the ability to purchase coverage through the public exchange in lieu of electing COBRA, CMS is offering a one-time special enrollment period running from May 2, 2014, through July 1, 2014, during which a person on COBRA may enroll in a QHP through a federally-facilitated exchange.
Note: The CMS special enrollment opportunity applies only in states in which the federally-facilitated exchange operates. CMS urged state operated exchanges to adopt a similar special enrollment period for COBRA beneficiaries, but a state exchange is not required to do so. We anticipate a number of state exchanges (but not necessarily all) will adopt a similar rule. For instance, at this time, we understand that California has adopted a similar rule with respect to its state operated exchange. Remember the availability of public exchange coverage is through the individual’s state of residence. Employers with employees in other states that operate their own exchanges should check with that exchange to see if it has adopted a similar rule.
Updated Model Notices. The DOL also released updated model COBRA notices. The DOL updated both the general (initial) notice and the election notice to include information about the availability of coverage through the public insurance exchanges; regardless of whether a Federal or state operated exchange. The updated notices are available at http://www.dol.gov/ebsa/COBRA.html. Use of the updated model notices will be considered compliance with the COBRA notice requirements.
Note: Plans are not required to use the model notices (and many do not). For plans that do not use the model notices, the revised model notices are insightful with respect to updating custom notices.
To facilitate future updates to the model notices, the DOL also proposed an amendment to the COBRA notice regulations to allow the DOL to make future changes simply by posting the updated notices on its website.
Action Items.
In light of these two pieces of guidance, employers should consider the following:
- If you have COBRA beneficiaries that reside in a state that uses the federally-facilitated exchange or that has adopted a similar special enrollment rule for its own state exchange, consider notifying COBRA beneficiaries of the special enrollment opportunity.
- If you currently use the DOL model COBRA notices, begin using the updated models.
- If you currently use custom COBRA notices, update those notices to add information similar to what the DOL added to the model notices. Keep in mind that adjusting custom notices likely is not as simple as making the exact changes made to the model notices. Care should be taken to ensure the changes to custom notices are accurate (e.g., the new information is added only with respect to group health plans to which it applies, etc.).
- If a third party prepares COBRA notices on your behalf, confirm the third party has updated its COBRA notices consistent with the changes made to the DOL model notices.
- Take this opportunity to review all COBRA-related documentation to ensure it is up-to-date and accurate. For example, review and adjust SPD language, COBRA policies and procedures, COBRA provisions applicable to health FSAs, etc. Also, review the COBRA operations (e.g., timing of notices, method of delivery, recipients, etc.).
Note: Employers have no legal obligation to provide notice of the special enrollment opportunity. However, making COBRA beneficiaries aware of the availability of exchange coverage could lead COBRA beneficiaries to drop their COBRA coverage and enroll in a QHP. Coverage through the exchange is likely less expensive than COBRA coverage. In addition, reducing the number of COBRA participants is often a good thing for the plan and the employer.
If you would like more information, assistance with reviewing and updating COBRA notices, or assistance in developing your strategy in response to this recent guidance, please contact us.