Important Guidance Issued on COBRA/Marketplace Coverage Interplay
Written By Ed Redder
In early May 2014, the Department of Labor (DOL) and Department of Health & Human Services (HHS) issued several pieces of guidance regarding the interplay between COBRA and new Marketplace coverage. The guidance provides important information and clarification to both plan administrators and plan participants regarding their opportunities and obligations.
COBRA—the Consolidated Omnibus Budget Reconciliation Act—makes available healthcare continuation rights to individuals who lose coverage under a group health plan as a result of a qualifying event (such as termination of employment). COBRA requires delivery of a general COBRA notice to each covered employee at or near the start of employment, and a COBRA election notice to qualified beneficiaries within 14 days after the plan receives notice that a qualifying event has occurred. These notices provide detail regarding the individuals' rights under COBRA.
For the first time, individuals could enroll in policies offered on a Health Insurance Marketplace (Marketplace) for coverage effective as early as January 1, 2014. In certain circumstances, individuals could qualify for premium tax credits and cost-sharing subsidies to make such coverage more affordable; in some cases, less expensive than COBRA coverage.
Given the new opportunities available to individuals in the Marketplace, the DOL and HHS recently issued several pieces of guidance addressing the new opportunities available and the interplay between COBRA and Marketplace coverage.
In early May, the DOL issued the following guidance on COBRA/Marketplace coverage:
• COBRA model general and election notices (Model General Notice & Model Election Notice) which contain additional information regarding a qualifying beneficiary's opportunity to obtain Marketplace coverage (or other employer-sponsored coverage such as through a spouse's employer's plan) rather than COBRA coverage as a result of a qualifying event (and the fact that Marketplace coverage may be more affordable for a qualifying beneficiary).
• FAQs about Affordable Care Act Implementation (Part XIX) (FAQ – ACA 19) which generally describe the updated model COBRA general and election notices, and the plans' use of the revised model notices
• Proposed Rules (EBSA Proposed Rules) that proposes certain technical changes to the model COBRA general and election notices, including moving the model notices from the current appendices and granting the DOL with greater flexibility to modify the models for future regulatory changes
Contemporaneous with the DOL's related guidance, HHS issued the following guidance on COBRA/Marketplace coverage:
• FAQs substantively identical to those issued by the DOL
• CMS Guidance (SEP and Hardship FAQ) describing special enrollment periods available to individuals eligible or enrolled in COBRA to elect Marketplace coverage.
Noting the perceived confusion surrounding the interplay between COBRA and special enrollment rights for Marketplace coverage, CMS also announced a special enrollment period through July 1, 2014 during which persons eligible for COBRA and COBRA beneficiaries may drop COBRA coverage and enroll in Marketplace coverage.
Based on the guidance, and recognizing the costs and risks involved with COBRA beneficiaries, plan sponsors/administrators should consider—
• Implementing the revised model notices—or modify their own versions consistent with the model notices—to effectively communicate the possible availability of Marketplace (or other) coverage as a cost-effective alternative to COBRA coverage
• Communicating the limited special enrollment period to those currently eligible to elect COBRA coverage and those currently enrolled in COBRA coverage
Please contact a member of Findley Davies' Health & Group Benefits practice with questions or for assistance with the issues raised in this update.