New Model COBRA Notices and Guidance on Marketplace Enrollment of Individuals with COBRA Rights

On May 2, 2014, the Department of Labor (DOL) published new model notices of rights under the Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Centers for Medicare & Medicaid Services (CMS) published guidance on how an individual with COBRA rights is treated with respect to enrollment for health coverage through the Healthcare.gov Marketplace.¹

This Capital Checkup describes these developments, which are important because they clarify previous guidance that was confusing for participants and plan sponsors. The issue concludes with next steps for plan sponsors.

The New Model Notices

The DOL published two new model notices for COBRA rights: a general notice and an election notice. These new model notices reflect that the Healthcare.gov Marketplace is now open and better describe how it interacts with COBRA. They are available on the DOL website as Word documents. Although the use of the models is not mandatory, the model notices provide a blueprint for how to update COBRA notices.

In addition, the DOL also published a proposed rule that will clean up existing regulations and will allow the DOL to publish updated model notices online,² rather than in regulations. Comments on the proposed rule are due by July 7, 2014.

Last, the DOL published a new model notice for coverage under the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).³

Guidance on Marketplace Enrollment

The new CMS guidance⁴ clarifies the following general rules:

• Open Enrollment  Individuals may enroll in a qualified health plan through the Marketplace during the annual open enrollment period. (For coverage starting in 2015, the open enrollment period will begin on November 15, 2014 and run through February 15, 2015.)
• Special Enrollment  Individuals may “specially enroll” in a qualified health plan through the Marketplace when they are initially eligible for COBRA due to a loss of other minimum essential coverage, including employer-sponsored coverage, or they have exhausted COBRA coverage. Special enrollment is not permitted merely because an individual stops paying COBRA premiums and loses COBRA coverage as a result.
• Additional 2014 Special-Enrollment Period  In general, if an individual was initially eligible for COBRA but did not specially enroll in Marketplace coverage within 60 days, he or she would not be able to enroll in Marketplace coverage until he or she exhausts COBRA coverage or until the next Marketplace open enrollment period. However, because of the lack of clarity of COBRA information from the government agencies, CMS has created a new special enrollment period from May 2, 2014 through July 1, 2014. During this special enrollment period, individuals who are eligible for COBRA as well as COBRA beneficiaries are able to select qualified health plans through the federal Marketplace by contacting the Marketplace call center at 1-800-318-2596 to activate the special enrollment period, noting that they are calling about their COBRA benefits. CMS is encouraging state Exchanges to adopt similar rules, but it is unclear which ones will do so.

Next Steps for Plan Sponsors

Now that CMS has clarified how COBRA interacts with Marketplace coverage and the DOL has revised the model notices, it is important for plan sponsors to take a fresh look at their COBRA notices. Plan sponsors that updated their COBRA notices using the previous models published in 2013⁵ should update the notices using the new language.

Plan sponsors may want to notify individuals who are receiving COBRA coverage about the special enrollment period.

In light of the new notices, this may also be a good time to complete a review of COBRA administration to assure that a plan’s implementation of COBRA is consistent with its plan document and regulatory requirements.

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As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with plan sponsors and their attorneys on compliance issues.

¹ The Affordable Care Act, the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152, created health insurance Exchanges. The Marketplace is the name for the federal government’s Exchange. (Return to the Capital Checkup.)

² The proposed regulations were be published in the May 7, 2014 Federal Register. (Return to the Capital Checkup.)

³ For information about this law, see Sibson’s February 2009 Bulletin, “CHIP Reauthorization Requires Fast Action by Group Health Plans.” (Return to the Capital Checkup.)

⁴ The guidance, “Special Enrollment Periods and Hardship Exemptions for Persons Meeting Certain Criteria,” is available on the CMS website. (Return to the Capital Checkup.)

⁵ For a description of those model notices, see Sibson’s June 27, 2013 Capital Checkup, “Federal Government Releases Model Employer Notice under the Affordable Care Act and Revised Model COBRA Election Notice.” (Return to the Capital Checkup.)