Capital Checkup

 

March 23, 2009

DOL Issues COBRA Subsidy Model Notices

On March 20, 2009 the U.S. Department of Labor (DOL) published in the Federal Register an announcement that model health care continuation coverage notices required by the American Recovery and Reinvestment Act (ARRA) are now available.1 These model documents are located on the following page of the DOL's Web site: http://www.dol.gov/ebsa/COBRAmodelnotice.html

Employers and plans may use these models in connection with notice requirements under the new COBRA subsidy program.2 The DOL created different packages of model documents to cover the different situations where notices are required under the new law. While the different scenarios may seem confusing, essentially a group health plan (whether public or private, insured or self-insured) that is covered by the federal COBRA law,3 has two categories of notices that it must provide:

  • Notice in Connection with Extended Election Period This notice provides Assistance Eligible Individuals4 who had a COBRA qualifying event between September 1, 2008 and February 16, 2009 with a second opportunity to elect COBRA because they either failed to elect COBRA when first eligible, or they elected it and later dropped the coverage. This notice must be sent by April 18, 2009.
  • General Notice This notice must be provided to everyone else who is a qualified beneficiary who has experienced (or will experience) a qualifying event at any time from September 1, 2008 through December 31, 2009. This goes to all qualified beneficiaries regardless of type of the qualifying event. Individuals in this group would include those with a qualifying event within the relevant period who (1) are currently enrolled in COBRA; (2) are currently in the election period for COBRA; or (3) who will be eligible for COBRA going forward.

This Capital Checkup provides additional information about both of these notices.

Notice in Connection with Extended Election Period

The package of information that goes to this group of individuals includes the following:

  • A COBRA election form,
  • Information about the ARRA and the extended election period,
  • A form for switching COBRA coverage options, if the plan allows this,5
  • A form for a qualified beneficiary to request the COBRA subsidy, and
  • A participant notification form for the qualified beneficiary to use to notify the plan if they become eligible for other coverage.

The March 20, 2009 Federal Register notice states that this package of information would go to those who are or would be Assistance Eligible Individuals. This means that the plan is not required to send this package to everyone who has had a qualifying event within the relevant time period. The plan can make reasonable assumptions about who is or is not eligible for the subsidy, including who has had an involuntary termination. Many plans may not be in a position to do this for several reasons. First, there are still open questions about what involuntary termination means. In addition, many entities that administer COBRA are not the employers themselves and do not have access to information about why an individual is entitled to COBRA. Some plan sponsors may wish to consider sending a notice to everyone whose coverage was terminated during the relevant period to make sure everyone who potentially could take advantage of the subsidy has the option to do so. Plan sponsors should discuss this with their legal counsel, administrator and/or insurer.

General Notice

This package of documents would go to all qualified beneficiaries who have any qualifying event between September 1, 2008 and December 31, 2009. DOL has a short and a long version of the model document packages for the general notice. The longer version contains information for those who have not yet received a COBRA election notice, and includes the election material as well as all of the information contained in the package for the Notice in Connection with Extended Election Period. The shorter version is for those who have already elected and are currently receiving COBRA. These individuals do not need an election form, but need information in order to request the subsidy.

Who Sends the Notices?

The ARRA statute says that the "administrator of the group health plan involved" must provide the Notice in Connection with Extended Election Period. Segal expects that the same entity that sends out standard COBRA notices would send this as well as the other COBRA subsidy notices. However, plan sponsors will need to confirm who is taking on this responsibility: the employer, the plan, an insurer or a COBRA vendor. The entity sending out the notices may be a different entity than the one that is paying the upfront 65 percent of the COBRA premium and/or obtaining the reimbursement from the government for this 65 percent. Coordination will have to be done on several levels depending on the current arrangement.

Should the Models Be Amended?

There is no requirement to use the model documents provided. However, the DOL has said informally that by using the models the plan is deemed to have met the statute's form and content requirements for these notices. Note that neither the ARRA nor the March 20, 2009 Federal Register announcement specifically states that use of the models is deemed compliance with the form and content requirements. Plan sponsors may wish to check with their counsel to determine the best approach for use of the models. Plan sponsors may wish to customize certain aspects of the models to better describe their specific program.

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As with all issues involving the interpretation or application of laws, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the ARRA. The Segal Company can be retained to work with plan sponsors and their attorneys to comply with the COBRA premium assistance program,including providing assistance in developing policies and procedures to handle this new program, designing notices and evaluating COBRA premium methodology.

1
The announcement is on pages 11971-11973 of the March 20, 2009 Federal Register. (Click on the following text to return to the Capital Checkup.)
2
For information about the COBRA subsidy program, see The Segal Company's February 2009 Bulletin, "The Stimulus Law's Temporary Subsidy for COBRA Premiums." (Click on the following text to return to the Capital Checkup.)
3
Insurers for those plans not covered by federal COBRA, but covered by a state health continuation coverage law covering employers with less than 20 employees, will need to send out what the DOL calls an "Alternative Notice." The DOL provides a model Alternative Notice that will have to be customized based on the relevant state law. (Click on the following text to return to the Capital Checkup.)
4
An Assistance Eligible Individual is someone eligible for COBRA as a result loss of coverage due to the involuntary termination of employment at any time between September 1, 2008 and December 31, 2009. (Click on the following text to return to the Capital Checkup.)
5
The ARRA permits, but does not require, a plan to allow an Assistance Eligible Individual to elect different coverage than what he/she was enrolled in, under certain circumstances. (Click on the following text to return to the Capital Checkup.)

Capital Checkup is The Segal Company's periodic electronic newsletter summarizing activity with respect to health care and related subjects. Capital Checkup is for informational purposes only. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.

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