COBRA CONUNDRUMS reprinted from the August, 2013 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.

Dear COBRA Bob,

Many of my employer clients have been asking if HIPAA Certificates of Creditable Coverage will still be required under health reform once preexisting conditions are no longer an issue. Your thoughts?

 - Wannabe Credible in Clearwater

Dear Credible,

Great question! Proposed regulations say you have to continue to provide HIPAA certificates until December 31, 2014.  After that, they are no longer required.  The requirement to provide them during 2014 is due to the ban on preexisting conditions applying differently to non-calendar year plans.  

As I’m sure you know, certificates of credible coverage were originally created so that individuals could transition from one health plan to the next, while minimizing preexisting condition exclusions by their new plans. Currently, when participants terminate group health coverage; are entitled to COBRA; or terminate COBRA coverage, they receive a certificate of creditable coverage documenting the most recent period of creditable health coverage. In most cases, a pre-health reform plan can impose a 12-month preexisting condition clause. However, this exclusion period must be reduced by an individual’s creditable coverage amount. If a participant has 12 months of creditable coverage, the usual preexisting condition limitations do not usually apply.

While it’s true that the Affordable Care Act (ACA) eliminates preexisting condition limitations, the change applies for health plans beginning on or after January 1, 2014. Therefore, employers should continue to provide certificates of creditable coverage throughout 2014. This will prevent transitioning employees from encountering preexisting condition clauses on plans that transition mid-year.

For example, Susan leaves her employer on March 14, 2014 and terminates her coverage. She is unemployed for roughly four months and finally lands a new job in September. When she tries to secure health coverage with her new employer, she discovers that their ACA-compliant plan does not take effect until November 1. In the meantime, the existing health plan contains a preexisting condition clause. Because Susan does not have a certificate of creditable coverage, she may encounter preexisting condition exclusions.

Of course, this is exactly the kind of situation we all want to avoid. So with this in mind, please tell employers to continue issuing certificates. They should also know that when they issue a certificate of creditable coverage for the participant, they should also issue creditable coverage certificates for any dependents. If the creditable coverage period is the same for all, they can issue one certificate that includes employee and dependent information.

Employers should provide the certificate of creditable coverage upon these triggers:

• If participant is eligible to elect COBRA coverage: Certificate must be provided no later than when an election notice is required to be provided for a qualifying event under COBRA (no longer than 44 days but sooner is already better than later).
• If a participant loses health plan coverage but is not eligible for COBRA:  Certificate must be provided within a “reasonable time” after the coverage ceases. I would recommend providing the notice within 14 days and absolutely no later than 30 days.
• When COBRA coverage ends for any reason (including a grace period lapse): Again, the certificate must be provided within a “reasonable time” after the coverage ceases.
• Upon employee request: Must be issued within a reasonable time period.

While the creditable coverage certificate requirements may sound complicated, most of your employer clients can simply keep doing what they’ve been doing – at least through 2014. And that will be good news for employers who have a lot of other changes to worry about!

Do your best,

COBRA Bob