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Department of Labor Issues New COBRA Regulations
On May 26, 2004, the Department of Labor (DOL) issued new regulations regarding notice requirements for health care continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The rules apply to notice obligations that arise on or after the first day of the first plan year beginning on or after November 26, 2004. The final rules are designed to reduce uncertainty about how to comply with COBRA notice requirements and to make it easier for qualified beneficiaries to understand how to exercise their rights under COBRA.
Under COBRA, group health plans must generally provide qualified beneficiaries who would lose coverage under certain circumstances with the opportunity to elect to continue coverage for a limited time at the group rates. The new rules set minimum standards for the timing, content, and administration of the notices already required under the COBRA provisions, as well as require two additional notices where applicable.
General Notice Requirement
COBRA requires group health plans to provide written notice of COBRA rights to employees and dependents “at the time of commencement of coverage under the plan.” The new rules require that this notice be provided within 90 days of when coverage begins and include the name of the plan, a general description of the coverage, and the rights and responsibilities of qualified beneficiaries. The notice may be provided in a separate document, or may be incorporated into the summary plan description (SPD) of the plan. If an individual experiences a qualifying event (i.e., an event that would cause an individual to lose coverage) within the initial 90-day period, the General Notice obligation may be fulfilled simply by furnishing the required Election Notice (see below).
The final rules contain a model General Notice. The model notice is designed for single-employer plans and must be modified to reflect the special rules or practices applicable to other types of plans.
Employer-Provided Notice of Qualifying Event
Employers must notify plan administrators within 30 days of the following qualifying events: an employee’s termination of employment or reduction in hours of employment, death, or entitlement to Medicare, or the commencement of a proceeding in bankruptcy with respect to the employer. The new rules specify that for plans which begin COBRA coverage upon the date of loss of coverage, the 30-day period for providing notice must also begin on the date coverage was lost (as opposed to the date of the qualifying event). The rules also require that the content of such notice be sufficient to allow an administrator to identify the plan, the covered employee, the qualifying event, and the date of the qualifying event.
Qualified Beneficiaries’ Notice Requirement
Qualified beneficiaries are required to notify the plan administrator, generally within 60 days, of the occurrence of certain qualifying events: divorce, legal separation, a child ceasing to be a dependent under the plan, occurrence of a second qualifying event, and certain Social Security disability determinations. The final rules require that a plan establish “reasonable procedures” for providing the required notice. Such procedures should be described in the plan’s SPD and identify the individual designated to receive such notice, the means by which notice should be given, and the information required under the plan in order to provide continuation coverage. A plan may require use of a specific form to provide notice, so long as the form is easily accessible and available without cost. In the absence of reasonable procedures, notice will be deemed to have been provided when a written or oral communication identifying a specific qualifying event is made to the individual or department customarily considered to be responsible for the plan.
The rules also set time limits for notification. In general, a qualified beneficiary must provide notice of a qualifying event within 60 days. The 60-day period begins to run on the latest of (i) the date of the qualifying event; (ii) the date on which coverage is lost; and (iii) the date on which the qualified beneficiary is informed of the notification obligation through the general COBRA notice or through the plan’s SPD. With respect to notice of disability, the qualified beneficiary must generally provide notice within 60 days of the latest of (i) the date of the disability determination; (ii) the date of the qualifying event; (iii) the date on which coverage is lost; and (iv) the date on which the covered individual is informed of the obligation to provide notice.
Plan Administrators’ Notice Obligations
A. Election Notice
Upon notice of a qualifying event, the plan administrator must provide each qualified beneficiary with notice of the right to continue coverage under the plan. Under the final rules, notice must typically be provided within 14 days after notice of a qualifying event is received. Where the employer is also the plan administrator, the election notice must be provided within 44 days after coverage is lost or the date of the qualifying event (depending on the plan’s provisions). The rules also set forth the content requirements for such notice and provide a model notice.
B. Unavailability of COBRA Coverage Notice (NEW)
The final rules require a new “unavailability of continuation coverage” notice in appropriate circumstances. If the plan administrator receives notice of a qualifying event, second qualifying event, or disability determination but determines that the qualified beneficiary is not entitled to continuation coverage, notice must be sent to that individual explaining the determination. The notice must be sent in the same timeframe applicable to the Election Notice.
C. Early Termination Notice (NEW)
Plan administrators will also now be required to send a ” termination of continuation coverage” notice whenever termination takes effect earlier than the end of the maximum period of coverage applicable to the relevant qualifying event. Such notice must be sent “as soon as practicable following the administrator’s determination that continuation coverage shall terminate.”
Next Steps
Employers should review their current COBRA notices, SPDs, and procedures to ensure that they comply with the final DOL regulations, including implementation of an Unavailability of Continuation Coverage Notice and an Early Termination Notice. With regard to the general notice and election notice, it may be helpful to review the model notices provided by the DOL. Note that if you decide to use the model notices, you may need to modify the notices to reflect the particular terms of your plan.