Model COBRA Election Notice Updated for ACA Changes

Many provisions of the Affordable Care Act (ACA) that become effective beginning in 2014 are designed to expand access to affordable health coverage. Beginning January 1, 2014, individuals and employees of small businesses will have access to health coverage through ACA's health insurance exchanges (Exchanges). According to the Department of Labor (DOL), the Exchanges will create competitive health insurance marketplaces where consumers can go to find and compare private health insurance options.

On May 8, 2013, the DOL issued Technical Release 2013-02. This Technical Release provides an updated model election notice for group health plans for the purposes of the continuation coverage provisions under COBRA. The model COBRA election notice was updated to inform qualified beneficiaries of coverage options available through the Exchanges and other ACA reforms related to continuation coverage.

Plan sponsors should consider revising their COBRA election notices to include these ACA updates. When the Exchanges and premium tax credits go into effect in 2014, it is possible that fewer qualified beneficiaries will elect COBRA to obtain health coverage and this may result in a cost-savings for the employer-sponsored health plan.

ELECTION NOTICE REQUIREMENT

In general, under COBRA, an individual who was covered by a group health plan on the day before a qualifying event occurred may be able to elect COBRA continuation coverage upon a qualifying event (such as termination of employment or reduction in hours that causes loss of coverage under the plan). Individuals who are eligible for COBRA coverage are called qualified beneficiaries.

A group health plan must provide qualified beneficiaries with an election notice, which describes their rights to continuation coverage and how to make an election. The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event.

The election notice is required to include:

• The name of the plan and the name, address and telephone number of the plan's COBRA administrator;
• Identification of the qualifying event;
• Identification of the qualified beneficiaries (by name or by status);
• An explanation of the qualified beneficiaries' right to elect continuation coverage;
• The date coverage will terminate (or has terminated) if continuation coverage is not elected;
• How to elect continuation coverage;
• What will happen if continuation coverage isn't elected or is waived;
• What continuation coverage is available, for how long, and (if it is for less than 36 months) how it can be extended for disability or second qualifying events;
• How continuation coverage might terminate early;
• Premium payment requirements, including due dates and grace periods;
• A statement of the importance of keeping the plan administrator informed of the addresses of qualified beneficiaries; and
• A statement that the election notice does not fully describe COBRA or the plan and that more information is available from the plan administrator and in the plan's summary plan description (SPD).

UPDATED MODEL COBRA ELECTION NOTICE

The DOL has provided a model election notice that plans may use to satisfy the requirement to provide the election notice under COBRA. The DOL updated the notice to make qualified beneficiaries aware of other coverage options available in the Exchanges and also to incorporate ACA's prohibition on pre-existing condition exclusions.

As with the earlier model, in order to use the updated model election notice properly, the plan administrator must complete it by filling in the blanks with the appropriate plan information. Employers are not required to use the DOL's model COBRA election notice. However, use of the model election notice, appropriately completed, will be considered by the DOL to be good faith compliance with the election notice content requirements of COBRA.

The model election notice is available in modifiable, electronic form. A redlined copy is also available, which shows the changes that were made from the prior model notice. The notices and related information can be found on the DOL's COBRA Continuation Coverage Web page.

Source: Department of Labor

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. Design © 2013 Zywave, Inc. All rights reserved.

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