DOL COBRA Election Notice Substantially Revised | Practical Law

DOL COBRA Election Notice Substantially Revised | Practical Law

The Department of Labor (DOL) has issued proposed regulations that amend the notice requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Accompanying the proposed regulations are updated model COBRA notices, including a significantly revised COBRA election notice containing new content on the health insurance exchanges under the Affordable Care Act (ACA).

DOL COBRA Election Notice Substantially Revised

Practical Law Legal Update 6-567-0685 (Approx. 5 pages)

DOL COBRA Election Notice Substantially Revised

by Practical Law Employee Benefits & Executive Compensation
Published on 06 May 2014 • USA (National/Federal)
The Department of Labor (DOL) has issued proposed regulations that amend the notice requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Accompanying the proposed regulations are updated model COBRA notices, including a significantly revised COBRA election notice containing new content on the health insurance exchanges under the Affordable Care Act (ACA).
The DOL's Employee Benefits Security Administration (EBSA) has issued a substantially revised model COBRA election notice, which includes several paragraphs of new content addressing the health insurance exchanges under the Affordable Care Act (ACA). The DOL's initial model notice (also referred to as the "general" notice) is also updated to reflect the exchanges (see Practice Note, Health Insurance Exchange and Related Requirements under the ACA). The updated notices, both of which are available on the DOL's website, accompany:
  • Proposed regulations amending the DOL's 2004 final COBRA notice regulations (see Practice Note, COBRA Overview).
  • An HHS bulletin providing a new special enrollment period under the exchanges for COBRA-eligible individuals and COBRA beneficiaries.

Updated DOL Model COBRA Notices

Group health plans must provide:
  • A written initial notice of COBRA rights to covered employees and spouses when their plan coverage begins.
  • An election notice when certain qualifying events occur, for example, a termination of employment or reduction in hours causing a loss of plan coverage (see Practice Note: COBRA Overview: Notification Requirements).
Final DOL regulations issued in 2004 included model COBRA notices (in appendices to the regulations). In May 2013, the DOL issued Technical Release 2013-02, which provided an updated COBRA model election notice that:
(See Legal Update, DOL Issues Model Exchange Notices, Updated COBRA Election Notice and Related Guidance: Updated COBRA Election Notice.)

Initial (General) Notice

The revised initial COBRA notice includes a new instruction page stating that plan administrators must fill in the form's blanks with the appropriate plan information to properly complete the form. (However, plans need not include the instruction page with the initial notice.)
Though much of the language tracks with the 2004 version, parts of the revised initial notice are new or rearranged. For example, the updated initial notice includes two new paragraphs of text (one near the beginning and another at the end) referencing coverage options under the exchanges that may be available to individuals who lose their group health coverage, as well as special enrollment options (see New Special Enrollment Period Available). The latter paragraph includes a link to the government's exchange website (healthcare.gov). Also, certain language regarding the duration of COBRA continuation coverage has been shortened.
The initial notice also includes features apparently intended to enhance readability, including shorter sentences, the use of contractions and bulleted information.

Election Notice

As with the initial notice, the updated election notice includes a new instruction page for plan administrators. Many of the substantive updates to the election notice characterize COBRA continuation coverage as one of several coverage options (for example, coverage under the exchanges) available to individuals. While some of the language in the election notice is simply rearranged (relative to the 2004 version), extensive sections of the notice are new. For example, the paragraphs addressing exchange coverage emphasize that:
  • Coverage under the other options may cost less than COBRA coverage.
  • It may be difficult for an individual to switch to another coverage option once a coverage decision is made.
In discussing the length of COBRA coverage (and possible extensions), the election notice includes a link to a DOL webpage with additional information about electing COBRA. Information regarding paying for COBRA coverage now appears on the final page of the election notice.
The election notice contains two pages of exchange-related content, including:
  • An overview of exchange-based coverage addressing the availability of premium tax credits and cost-sharing.
  • The 60-day special enrollment option to enroll in exchanges after an individual loses employment-based health coverage (see New Special Enrollment Period Available).
  • Options for switching between COBRA coverage and exchange-based coverage, including a warning that individuals who terminate COBRA coverage without another qualifying event:
    • must wait to enroll in exchange coverage until the next open enrollment period; and
    • could therefore be without health coverage for a period of time.
  • A list of factors for individuals to consider in choosing among coverage options (including premiums, provider network access, drug formularies, possible severance plan payments, benefit service areas and cost-sharing options).
Also, the election notice's "For more information" section now expressly references the ACA and the exchanges. The actual COBRA election form, now toward the end of the model election notice, is substantially similar to the version in the 2004 regulations.

Proposed Regulations

The proposed regulations amend portions of the 2004 COBRA regulations addressing use of the model initial and election notices, and delete the appendices containing the old model notices (which, according to the DOL, are now outdated). These changes will allow the DOL to:
  • Amend the model notices as it deems necessary.
  • Provide the most recent version of the model notices on its website.
In the preamble to the proposed regulations, the DOL requests comments on the model notices.
The DOL also issued FAQ guidance regarding the proposed regulations and updated model notices (see Legal Update, FAQs Address Updated COBRA Notices, Cost-Sharing Limits, SBCs and More).

New Special Enrollment Period Available

A related HHS bulletin issued on May 2, 2014 addresses three special enrollment periods for individuals seeking to enroll in qualified health plans (QHPs) through the exchanges. One of these special enrollment periods applies to COBRA-eligible individuals and COBRA beneficiaries, who are permitted 60 days from issuance of the HHS bulletin (that is, until July 1, 2014) to select QHPs in the exchanges. The bulletin includes instructions to assist eligible individuals in taking advantage of the COBRA-related special enrollment period.

Practical Impact

Until the proposed regulations are finalized and effective, the DOL will consider use of the newly revised model notices on its website, appropriately completed, as good faith compliance with COBRA's notice content requirements. As a result, plan administrators that have based their COBRA initial and election notices on the DOL models will want to become familiar with the changes -- in some cases extensive -- reflected in the updated models.
Under the proposed regulations (which would eliminate the 2004 versions of the notices), it will be easier for the government to make additional changes to its model notices in the future. Presumably, however, the DOL will provide notice if and when it makes such changes.