On May 2, 2014, the Department of Labor (the “DOL”) issued proposed regulations amending the notice requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). The proposed regulations are intended to align the COBRA notice requirements with current health care reform rules and to give the DOL flexibility to amend the model notices as it deems necessary in the future.
Specifically, the proposed regulations eliminate the current model general notice and model election notice. The proposed regulations also permit the DOL to post revised model notices on the DOL’s website. These changes are intended to eliminate confusion that may result from multiple versions of the model notices being available in different locations. Accordingly, the DOL contemporaneously issued updated model general and election notices, which reflect that health coverage is now available in the Marketplace (also known as the Exchange). In addition, the updated model election notice contains several other changes, including information on special enrollment rights in the Marketplace. The updated notices are currently available in modifiable, electronic form on the DOL’s website.
Note that the new model notices and related guidance do not address the potential “gap” in coverage that may arise for individuals who prefer Marketplace coverage, but incur claims during the period between the loss of coverage under a group health plan and the actual election of COBRA or Marketplace coverage. Although the COBRA election notice is not required to be provided for several weeks following a qualifying event, if timely elected, COBRA coverage is retroactive to the date of the loss of coverage. Coverage on the Marketplace, however, applies prospectively only. If an individual incurs a claim between the loss of coverage date and the COBRA or Marketplace election date, the individual is somewhat forced to elect COBRA coverage (which may be more expensive) to avoid a gap in coverage and ensure that claims are paid retroactively to the loss of coverage date. That individual will then need to wait until the next annual enrollment period (or a special enrollment period, if earlier) to elect coverage on the Marketplace. Alternatively, the individual could elect Marketplace coverage at his or her election time, but suffer a gap in coverage between the date of loss of coverage under the group health plan and the election of Marketplace coverage. At this stage, the COBRA notices do not address this issue and future guidance would be required to permit individuals the choice to opt out of COBRA coverage and elect Marketplace coverage more frequently.
Until the proposed regulations are finalized, the DOL will consider use of the updated model notices available on the DOL website to be good faith compliance with the notice content requirements of COBRA. While use of the model notices is not required, the model notices help employers facilitate compliance with the applicable COBRA guidance. That said, it may be appropriate for certain employers to tailor the model notices as appropriate for their practices.