Clarification Of Coverage Options For COBRA-Eligible Workers Released By DOL

Proposed regulations containing amendments to COBRA’s notice requirements have been issued by the Department of Labor (DOL), along with updates to COBRA model notices, clarifying to workers that, if they are eligible for COBRA continuation upon leaving a job, they may, instead, purchase coverage via the health insurance marketplace. The proposed regulations better align COBRA’s notice requirements with requirements of the Patient Protection and Affordable Care Act’s (ACA) provisions already in effect. The proposed regulations were published in the May 7 Federal Register.

Workers and their families who are eligible for employer-sponsored coverage generally must be informed of their right to COBRA continuation coverage at the start of employment. They also must be informed of their right to purchase COBRA coverage when separating from a job.

The regulations include updates to model notices informing workers of their eligibility to continue health care coverage through COBRA. The updates make it clear to workers that if they are eligible for COBRA continuation coverage when leaving a job, they may choose to instead purchase coverage through the health insurance marketplace.

The proposed changes to the model notices would offer information on more affordable options available through the marketplace, where workers and families may be eligible for financial assistance that would not otherwise be available for COBRA continuation coverage. In most cases, workers and their families eligible for, but not enrolled in, COBRA continuation coverage would be able to enroll in marketplace coverage outside the normal open enrollment period, during a special enrollment period (SEP).

Model notices. Along with the proposed regulations, the DOL has issued model notices that plans may use to satisfy the requirement to provide the general notice and election notice under COBRA. The updated model notices are posted on the DOL’s website at http://www.dol.gov/ebsa/modelgeneralnotice.doc and http://www.dol.gov/ebsa/modelelectionnotice.doc. Until rulemaking is finalized and effective, the DOL will consider use of the model notices, appropriately completed, to be good faith compliance with the notice content requirements of COBRA. The DOL notes that the use of the model notices is not required. The model notices are provided solely for the purpose of facilitating compliance with the applicable notice requirements.

FAQs on changes. A set of frequently asked questions (FAQs) related to the proposed changes to the model notices has been published by the DOL, the IRS, and the Health and Human Services Department (HHS). In addition to reiterating rules on out-of-pocket maximums, coverage of preventive services, and rules on health FSA carryovers and summaries of benefits and coverage, the FAQs point out that some COBRA beneficiaries may want to consider alternatives to COBRA coverage, such as coverage through the marketplace, especially since they may be eligible for a premium tax credit and cost-sharing reductions, so that the Marketplace may be a more affordable option than COBRA.

Special enrollment periods. Also issued was a bulletin detailing three types of SEPs, one of which addresses concerns of the HHS that previously-issued Model COBRA Continuation Coverage Election Notices may have failed to sufficiently address marketplace options, so that persons eligible for COBRA and COBRA beneficiaries may not understand that they can only enroll in qualified health plans in the marketplace either during open enrollment periods and SEPs. Such SEPs for people eligible for COBRA are: (1) when they are initially eligible for COBRA due to a loss of other minimum essential coverage; and (2) when their COBRA coverage is exhausted (see HHS Reg. Sec. 155.420(d)(1)).

Because of this potential confusion, the HHS is providing an additional SEP of 60 days from May 2, 2014, the date of the bulletin, to select qualified health plans in the federally-facilitated marketplace (FFM).

“In many cases, workers eligible for COBRA continuation coverage can save significant sums of money by instead purchasing health insurance through the Marketplace,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “COBRA continues to play an important role in helping workers and families maintain coverage after a job loss, and it is important that workers know that in some cases there is a Marketplace option as well.”

The CMS bulletin is available at http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/SEP-and-hardship-FAQ-5-1-2014.pdf.

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