Proper and timely notification is arguably the most important (and most frequently litigated) aspect of COBRA administration. The employer must provide a general notice at the commencement of active coverage. Let’s be honest, most employees do not continue reading past the title of this notice. However, an individualized election notice becomes due once a qualifying event occurs. The election notice is distributed to individuals at a time when things in their life are changing and they are considering options on the best path forward. Therefore, the election notice is extremely important.
Failure to include accurate and complete information in the COBRA election notice can lead to costly litigation and potential penalties of up to $110 per day. As discussed below, the Affordable Care Act (ACA) brought many changes to the health care world and to COBRA notices. Now, the threatened dismantling of the ACA could require rapid changes to protect the accuracy of information contained in COBRA election notices.
Change in the ACA will Mandate Changes to Your COBRA Election Notice.
As a service to plan sponsors, the Department of Labor (DOL) publishes a model COBRA election notice. Prior to the ACA, changes to the model notice were minor. But in 2013, and again in 2014, the DOL made sweeping changes to the model notice by weaving in information about Marketplace Exchange plans as a potentially cheaper alternative to COBRA. The model notice is now full of information about the ACA and not just in one easily removable section.
You might be wondering if you can get ahead of the game by removing the references to the ACA in your COBRA election notice. Then you can sit back and watch the hysterics unfold knowing that you have done your COBRA duties.
Not so fast. “The Department considers use of the model election notice to be good faith compliance with the election notice content requirements of COBRA until further rulemaking is issued and effective.” Plan Sponsors are not required to use the model election notice. However, veering too far from the blessed language can land you in hot water. Take the case of Marriott, for example.
The popular hotel chain is stuck defending a class action filed on January 17, 2017, alleging that its COBRA election notice deviated too far from the model election notice. Specifically, the complaint alleges that Marriott’s notice failed to include proper contact information, information about the right of a legal guardian to elect COBRA on behalf of a minor child and information about the consequences of failing to elect or waiving COBRA continuation coverage.
The Marriott case is only in its infancy. However, one takeaway even at the early stages is that making changes to the model COBRA election notice can be costly. As a plan sponsor, you should not make any preemptive changes to the ACA information contained in your election notice but should instead wait for official guidance.
Other COBRA Communications May Also be Affected by Changes to the ACA.
On June 21, 2016, the IRS, DOL and HHS issued FAQ Part 32 allowing employers to provide additional information potentially swaying employees away from COBRA.
“In addition [to use of the model notice], plan administrators may include with the COBRA election notice other information about the Marketplaces, such as: how to obtain assistance with enrollment (including special enrollment), the availability of financial assistance, information about Marketplace websites and contact information, general information regarding particular products offered in the Marketplaces, and other information that may help qualified beneficiaries choose between COBRA and other coverage options.”
Keep in mind that any information communicated to qualified beneficiaries should be accurate. If you or your service providers distribute additional ACA information along with election notices, make sure to update the additional information as required.
Final Words of Advice
Stay tuned to the rapidly changing health insurance environment. Ensure that you have the correct relationships and systems in place so that you will have timely notifications of any changes requiring action.
This article was reprinted from the April 2017 issue of Health Insurance Underwriter Magazine featuring our very own Robert Meyers.