The U.S. Department of Labor on March 19, 2009, issued model notices and revised FAQs related to the COBRA premium assistance subsidy available to qualifying individuals under the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA provides for temporary premium assistance, for a period of up to nine months, toward the cost of COBRA and state law continuation coverage for eligible individuals who are involuntarily terminated from employment during the period from September 1, 2008, through December 31, 2009. As detailed in our February 20, 2009, alert, “Immediate Action Required to Implement COBRA Subsidy Provisions in Stimulus Plan,” ARRA requires that group health plans and certain insurance issuers provide notices of the availability of premium reductions and additional election periods for health continuation coverage.
To assist administrators in satisfying the notice requirements, the Department of Labor issued four model notices and accompanying forms, each of which is intended to satisfy the notice requirements as to a particular group of qualified beneficiaries.
Model General Notice – Full Version. The full version provides general COBRA notice and election information, as well as premium assistance information, to all qualified beneficiaries (i.e., former covered employees, spouses and dependents) who:
- Experienced a qualifying event between September 1, 2008, and December 31, 2009, regardless of the type of qualifying event; and
- Have not yet received an election notice or were provided an election notice on or after February 17, 2009, that did not include the required notices related to the subsidy.
Note about the General Notice – One group of qualified beneficiaries is excluded from the qualified beneficiaries who must receive notice of ARRA’s COBRA subsidy provisions. Administrators are not required to send any additional COBRA notice to qualified beneficiaries whose qualifying event was not related to the employee’s involuntary termination of employment and who received a COBRA notice prior to February 17, 2009.
Model General Notice – Abbreviated Version. The abbreviated notice provides premium assistance information to qualified beneficiaries who are currently enrolled in COBRA as a result of a qualifying event that occurred on or after September 1, 2008.
Notice in Connection With Extended Election Period. The extended election period notice is provided in lieu of a general notice to any Assistance Eligible Individual (AEI) who:
- Experienced a qualifying event between September 1, 2008, and February 16, 2009; and
- Either did not elect COBRA continuation coverage, or elected COBRA but subsequently discontinued COBRA.
An AEI is a COBRA-qualified beneficiary (i.e., a covered employee, his or her covered spouse and dependent children) if:
- At any time during the period from September 1, 2008, through December 31, 2009, the qualified beneficiary is eligible for COBRA;
- The qualified beneficiary elects COBRA; and
- The applicable qualifying event is the employee’s involuntary termination between September 1, 2008, and December 31, 2009.
This notice provides information on the additional election opportunity and premium assistance, and:
- Must be provided by April 18, 2009;
- Specifies that COBRA coverage elected under the extended election period:
- begins retroactively on the first day of the first coverage period beginning on or after February 17, 2009 (March 1, 2009, in the case of a plan that charges COBRA premiums on a monthly basis); and
- ends no later than the date that is 18 months after the date of the qualifying event.
The special election opportunity is not required to be provided with respect to state continuation coverage provided under state insurance law, except to the extent that the state takes action to offer a special election period.
Alternative Notice. If a group health plan is not subject to the federal COBRA law and is subject to state continuation coverage (generally insured plans with less than 20 employees and some insured church plans), the plan’s health insurer (if it is providing group coverage) must provide the alternative notice to qualified beneficiaries who:
- Experienced a qualifying event between September 1, 2008, and December 31, 2009; and
- Were previously enrolled in group health insurance subject to state continuation coverage law.
The model alternative notice follows a format similar to the full general notice but requires the health insurer to modify the notice to reflect the requirements of the applicable state law. Notably, insurers must supply the following information:
- A list of qualifying events that would give rise to a right to continuation coverage under state law;
- Duration of continuation coverage following a qualifying event;
- Categories of individuals eligible for continuation coverage;
- Length of time during which an individual must decide whether to elect continuation coverage following receipt of the notice;
- Summary of state law rights and requirements related to continuation coverage.
- Availability of coverage extensions under state law;
- Identification of other state laws related to the election process, including laws affecting the rights of family members;
- General information about the cost of continuation coverage under the applicable state law provisions; and
- Requirements related to payment for continuation coverage, including periodic payment provisions or grace period provisions.
Contents of the Model Notices
The model notices and accompanying forms for each of the four groups of covered beneficiaries include variations on the premium subsidy information designed for each particular group and contain all of the information needed to satisfy the content requirements for the notice provisions.
COBRA Notice (including model cover letter to qualified beneficiaries and “Important Information About Your COBRA Continuation Coverage Rights”). The model notice:
- Presents general COBRA information, and information about the premium subsidy; and
- Advises any recipient who believes that he or she meets the assistance eligibility criteria to complete the separate “Application for Treatment as an Assistance Eligible Individual” form in addition to completing a COBRA election form.
Note – The model cover letter contains many options and alternatives that a plan administrator must tailor to the terms of its health plan.
COBRA Continuation Coverage Election Form. The model form:
- States a return deadline of 60 days from the date of the notice; or
- In the case of the alternative notice, requires the administrator to furnish the return deadline in accordance with state law.
Form for Switching Continuation Coverage Benefit Options. The model form:
- States a return deadline of 90 days after the date of the notice; and
- Alerts the recipient that the form is not the COBRA election notice, which must be separately completed and returned in order to secure continuation coverage.
Note – This form should be used only if the plan permits an AEI to change the plan option under which he or she was enrolled at the time the qualifying event occurred.
Summary of the Continuation Coverage Premium Reduction Provisions Under ARRA. The model summary:
- Sets forth the eligibility criter
- Describes an individual’s responsibility, if he or she receives premium assistance, to notify the plan in writing upon becoming eligible for other coverage;
- Notifies a recipient that electing the COBRA subsidy disqualifies the recipient for the Health Coverage Tax Credit;
- Explains the income limits and income tax recapture provisions applicable to premium assistance eligibility;
- Notes an individual’s right to waive the premium reduction; and
- Advises recipients of the right to appeal a denial of qualification as an AEI.
Request for Treatment as an Assistance Eligible Individual. The model form:
- Requires an applicant to answer five specific questions relevant to a determination of subsidy eligibility;
- Provides space to document the administrator’s decision regarding eligibility; and
- Includes space for other qualified beneficiaries to apply for treatment as AEIs. Premium Reduction Ineligibility Form. The model form:
- Advises a recipient that he or she must notify the plan upon becoming eligible for other group health plan coverage or Medicare; and
- States that failure to notify as required could result in a fine of 110 percent of the amount of the premium reduction.
The model notices are available in modifiable, electronic form at http://www.dol.gov/COBRA. As is the case with prior model COBRA notices, administrators are not required to use a model COBRA notice issued under ARRA, provided that an alternative version contains the required information.
The failure of an employer or administrator to comply with the notice requirements is treated as a failure to comply with COBRA and would subject the employer to fines of $110 per day, per affected individual, and to any excise taxes applicable under the Internal Revenue Code.
Review of COBRA Subsidy Denials
The updated FAQs state that the Department of Labor is currently developing a required application form and process for its review of premium assistance denials, which will include:
- Submission of the request for review application form online, by mail or by fax;
- Collection of information from the employer, plan or insurer where appropriate; and
- Department of Labor determination within 15 business days of receipt of a completed request for review.ia to receive the COBRA subsidy;