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On May 28, 2003, the Department of Labor issued new guidance in the form of proposed regulations addressing the COBRA notification requirements for group health plans. While the effective date of the proposed regulations is the first day of the first plan year beginning on or after January 1, 2004, the preamble to the regulations advises that plan administrators should stop using certain older notices, such as the model general notice provided in ERISA Technical Release 86-2, immediately because they no longer represent good faith compliance with the COBRA notice requirements. The proposed regulations provide some welcome guidance in the rather confusing area of COBRA notification rules. In the proposed regulations, the Department of Labor for the first time specifies a deadline by which the COBRA initial, or general, notice must be provided to covered employees and covered spouses. The regulations establish a 90-day period for issuing the general notice beginning with the date on which the employee or spouse first becomes covered under the plan. This requirement can be satisfied by including the general notice in the group health plan's summary plan description. The initial COBRA notice must include, among other things, (i) the plans name and contact information of the person responsible for administering COBRA benefits; (ii) a general description of the plan's COBRA provisions, including information about qualifying events, when COBRA benefits can be extended and the plan's requirements for the payment of COBRA premiums; and (iii) an explanation of when a qualified beneficiary is responsible for notifying the plan administrator about a qualifying event and the plan's procedures for providing such notice. The employer is responsible for notifying the group health plan administrator about a qualifying event triggering an individual's right to elect COBRA continuation coverage. This notice must be provided within 30 days of the qualifying event, although plans may provide for the 30-day period to begin running when the qualified beneficiary actually loses coverage. Qualifying events include the employee's termination or reduction in hours; the employee's death; the employee's enrollment in Medicare; and the employer's bankruptcy. The notice must include sufficient information to enable the plan administrator to determine the plan, the covered employee, the qualifying event and the date of the qualifying event. Covered employees or qualified beneficiaries are responsible for giving notice, within 60 days after the occurrence of certain qualifying events, to the plan administrator. These events include the divorce or legal separation of the employee from a spouse or a dependent's loss of eligibility for coverage under the plan due to age or higher education status. The covered employee or qualified beneficiary must provide notice within 60 days of experiencing a second qualifying event after COBRA coverage begins and must also provide notice regarding any disability determination that might extend the period of COBRA coverage. The 60-day time period is a minimum standard, and plans are free to adopt a longer period for employees and beneficiaries to give such notices. Reasonable procedures are to be established for the furnishing of notices by covered employees and qualified beneficiaries. The proposed regulations set forth general standards for determining the "reasonableness" of such procedures. These include a description of the notification procedures in the summary plan description; the person to receive such notices; the means to be used for giving the notice and the information the notice must contain; and a description of the qualifying events necessary for the plan to provide continuation coverage rights. A group health plan administrator has 14 days after receiving notice of a qualifying event to provide a COBRA election notice to each qualified beneficiary. Where the employer is responsible for notifying the plan administrator of a qualifying event and the employer is the plan administrator, the employer has 44 days to provide the election notice. The election notice must describe the continuation coverage being made available, how long it will last and any events that may cause it to be discontinued earlier; explain how COBRA rights must be exercised and that each qualified beneficiary has an independent right to elect continuation coverage; set forth the plan's payment requirements, including grace periods and consequences of nonpayment; describe any conversion options and how choosing them may affect continuation coverage rights; and explain the consequences of electing or not electing continuation coverage, including any effects on the individual's HIPAA portability and special enrollment rights. Additional provisions under the proposed regulations would require that notice be provided explaining why continuation coverage is not available where a plan administrator receives a notice of a qualifying event from a person not eligible to receive continuation coverage under the plan. The regulations also require a notice regarding early termination of COBRA coverage, which might occur, for example, when an employer ceases to provide group health coverage to its employees or when the COBRA premium is not timely paid. The notice must indicate the reason for the termination of coverage; the date of coverage termination; and any rights the qualified beneficiary may have to elect an alternative group or individual coverage. *By David J. Ledermann |
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