Employee Benefits-DOL Provides Guidance On The Notice Of Coverage Options Provided In Accordance With COBRA And The Affordable Care Act

The U.S. Department of Labor (the “DOL”) has issued a new FAQ (Part 32), to provide guidance on the Notice of Coverage Options required in accordance with COBRA and the Affordable Care Act (the “ACA”). Here is what the FAQ says:

Notice of Coverage Options – COBRA and Health Insurance Marketplace Coverage

The ACA Health Insurance Marketplaces (the “Marketplaces”) are designed to ensure that individuals and small businesses have access to affordable coverage through a competitive private health insurance market. The Marketplaces offer “one-stop shopping” to assist individuals in finding, comparing and enrolling in private health insurance options. In general, under the COBRA continuation coverage provisions, an individual who was covered by a group health plan on the day before a qualifying event (such as termination of the covered employee’s employment, divorce, or a dependent aging out of a plan, if the event causes a loss of coverage) may be able to elect COBRA continuation coverage upon experiencing the qualifying event. Individuals with such a right are called qualified beneficiaries. A group health plan must provide qualified beneficiaries with a COBRA election notice that, among other things, describes their rights to COBRA continuation coverage and how to make a COBRA coverage election.

Qualified beneficiaries may want to consider health coverage alternatives that are available through the Marketplaces and compare them to COBRA continuation coverage. Also, some qualified beneficiaries may be eligible for financial assistance, including premium tax credits and cost-sharing reductions. The DOL has a model election notice that plans may use to satisfy the requirement to provide the election notice under COBRA. On May 8, 2013, the DOL published Technical Release 2013-02 that revised the model COBRA notice to include more detailed information to help make qualified beneficiaries aware of other coverage options available in the Marketplaces. As described in that Technical Release and subsequent guidance, 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 until further rulemaking is issued and effective.

Q: The COBRA model election notice contains information about enrollment in the Marketplaces. Is it permissible for a group health plan administrator to include additional information about Marketplace coverage in or along with this notice? 

Yes. As explained in the COBRA model election notice, for certain qualified beneficiaries, coverage obtained through a Marketplace may be a less expensive healthcare coverage option than enrollment in COBRA continuation coverage. In Technical Release 2013-02, DOL indicated that the COBRA election notice may be used by plan administrators to assist qualified beneficiaries in understanding their health coverage options upon experiencing a qualifying event, including information regarding enrollment in Marketplace coverage (including the Marketplace website and phone number). DOL’s current model election notice is accessible at dol.gov/ebsa/modelelectionnotice.doc.

In addition, 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. We encourage plan administrators to consider how they can help individuals maintain the coverage that would best suit their needs through these transitions. COBRA election notices may be tailored to particular groups like young adults aging out of dependent coverage on their parents’ health plan. In all cases, they are required to be “easily understood by the average plan participant” and, therefore, information should not be too lengthy or difficult to understand.