COBRA CONUNDRUMS is reprinted from the May, 2014 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.
Employers and employees have made it through the first PPACA open enrollment and we all seemed to have learned a great deal. Employers continue to provide the vast majority of health care plans in the U.S. and many employees have a renewed sense of appreciation for the health care benefits they receive.
Last May, the Department of Labor (DOL) provided revised notices to help employers with the rollout of the PPACA’s first open enrollment which ended March 31, 2014. However, we all know that confusion is prevalent throughout any open enrollment period, and even more so during health care reform. So, it seems appropriate to revisit these notices one year after their release.
Technical release 2013-02 contains guidance on the Notice to Employees of Coverage Options (No. OMB 1210-0149) and the revised COBRA Model Election Notice. Both of these notifications are required of employers and are intended to make current and former employees aware of their rights to health plan coverage under PPACA and the Consolidated Omnibus Budget Reconciliation Act (COBRA). We will discuss the details of both of these notices below. The notice required for employers not providing health coverage is also available but is not part of this discussion.
- The Notice to Employees of Coverage Options: As with most mandated notifications, the DOL requires timing and method of delivery and this notice is no different. For 2014 and beyond, employees are to be provided this notice within 14 days of their date of hire. Make sure that your clients’ HR departments are aware of this requirement and encourage them to keep a stack of these notices on hand. Notice is to be provided in writing, automatically, free of charge, and must be written in a way that can be understood by the average employee.
According to the DOL, these notices may be provided by First-Class Mail. Alternatively, they may be provided electronically (via email) if the requirements of the DOL’s electronic disclosure safe harbor are met. See 29 CFR 2520.104b-1(c). As a best practice, employers should consider providing a physical copy to new hires along with their other paperwork and emailing them a copy of the notice as well.
- Model COBRA Continuation Coverage Election Notice: This notification was modified last May to include language for former employees and their families who experienced a COBRA qualifying event after January 1, 2014. It is essentially the same as the previous Election Notice except that it contains five separate references to the Marketplace. It is designed to introduce the Marketplace as another coverage option to former employees. The notice is also intended to help former employees gain a basic understanding of their choice between the employer-sponsored COBRA plan and coverage through the Marketplace.
The COBRA notice requirements are more defined by timing, form and content than the Coverage Options notice mentioned previously. The COBRA notice also has a penalty component which the other notice does not – employers are potentially subject to penalties of $110 per day for not providing these notices to COBRA qualified beneficiaries in a timely manner. As for the timing, the employer has 30 days to notify the administrator, who in turn has 14 days to mail the COBRA notice to each qualified beneficiary. COBRA also requires that the notice be furnished using “measures reasonably calculated to ensure actual receipt.” A best practice is to have your COBRA administrator send the notice via U.S. Mail and maintain “proof of mailing” as part of its record-keeping responsibilities.
These notices are distinctly different and will undoubtedly be modified as the rules of PPACA continue to evolve. It will be interesting to see if the DOL, the U.S. Department of Health and Human Services and the Internal Revenue Service will collaborate to ensure that their future requirements are well-coordinated. It sure would be welcome relief to those of us in benefits administration. Stay tuned.