COBRA Notification Requirements Final Regulations

Background
Congress passed the landmark Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1986. COBRA provides for continuation of group health care coverage that otherwise might be terminated. Continuation coverage is a temporary extension of the qualified beneficiary's previous group health coverage. The right to elect continuation coverage allows individuals to maintain group health coverage under adverse circumstances and to bridge gaps in health coverage that otherwise could limit their access to health care.

COBRA contains provisions giving certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when health coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since the employer usually pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves.

The Act generally covers group health plans maintained by employers with 20 or more employees in the prior year. It applies to plans in the private sector and those sponsored by state and local governments. The law does not, however, apply to plans sponsored by the federal government and certain church-related organizations.

Final regulations have been issued to set minimum standards for the timing and content of the notices required by COBRA. A summary of the required notices follows.

General Notice (Initial Notice)
The initial notice of continuation coverage eligibility must be furnished to each covered employee and to the employee's spouse (if covered under the plan) not later than the earlier of:

1) Either 90 days from the date on which the covered employee or spouse first becomes covered under the plan or, if later, the date that is 90 days after the date on which the plan first becomes subject to the continuation requirements; OR

2) The date on which the administrator is required to furnish an election notice to the employee or his or her spouse or dependent.

The final regulations clarify that where an individual is required to be furnished an election notice within the 90-day period for furnishing a general notice, the plan administrator can satisfy the general notice obligation by furnishing just the election notice.

The regulations permit delivery of a single notice addressed to a covered employee and the covered employee's spouse at their joint residence. There is no requirement that a separate


notice be provided to dependent children who share a residence with a covered employee or a covered employee's spouse. In-hand furnishing of the general notice at the workplace to a covered employee is deemed to be adequate delivery to the employee, although such delivery to the employee would not constitute delivery to the spouse. Delivery of the notice via first-class mail is considered sufficient.

The final regulations provide that the general notice requirements can also be satisfied by including the required information in the summary plan description (SPD) of the plan and providing the SPD at a time that complies with the timing requirements of the general notice.

Employer's Notice of Qualifying Event
The final regulations provide that an employer shall notify the plan administrator of a qualifying event no later than 30 days after the date of the qualifying event. However, for any plan under which continuation coverage begins with the date of loss of coverage, the 30-day period for providing notice of the qualifying event must also begin with the date of loss of coverage, rather than the date of the qualifying event.

An employer must provide the plan administrator sufficient information to enable the administrator to determine the identity of the plan, the covered employee, the qualifying event, and the date of the qualifying event.

Notice Requirements for Covered Employees and Qualified Beneficiaries
Covered employees and qualified beneficiaries are required to provide notice to the plan administrator in certain circumstances. These include notice of the occurrence of a qualifying event that is a divorce, legal separation, or a child's ceasing to be a dependent under the plan; the occurrence of a second qualifying event; a determination of disability by the Social Security Administration (SSA); and a determination by the SSA that a qualified beneficiary is no longer disabled.

The regulations require that plans provide reasonable procedures for the furnishing of these notices. Procedures are considered to be reasonable if they are described in the plan's Summary Plan Description, specify who is designated to receive notices, and specify the means qualified beneficiaries must use for giving notice and the required content of the notice.

A plan must allow an employee or qualified beneficiary at least sixty (60) days to provide notice of a qualifying event that is divorce, legal separation, a child's ceasing to be a dependent under the plan, or a second qualifying event. The 60-day period begins to run from the latest of:

• The date of the qualifying event.
• The date on which there is a loss of coverage, or
• The date on which the qualified beneficiary is informed, through the plan's SPD or the general COBRA notice, of his or her obligation to provide notice and the procedures for providing such notice.
   

In the event of determination of a disability, qualified beneficiaries are required to provide disability notice within sixty (60) days after the latest of:

• The date of the SSA disability determination.
• The date on which the qualifying event occurs.
• The date on which the qualified beneficiary loses coverage, or
• The date on which the qualified beneficiary is informed of the obligation to provide the disability notice.
   

Therefore, an individual who previously received an SSA disability determination and has not received a subsequent SSA determination that he or she is no longer disabled, would have at least 60 days after the occurrence of a qualifying event to provide the plan with a disability notice in order to be entitled to the disability extension of coverage.

Change in disability status - The time limits for notice of change in disability status may not end before the date that is thirty (30) days after the later of:

• The date of the final determination by the SSA that the qualified beneficiary is no longer disabled, or
• The date on which the qualified beneficiary is informed, through the furnishing of the plan's SPD or the COBRA general notice, of both the responsibility to provide the notice and the plan's procedures for providing such notice to the plan administrator.
   

Contents of the notice - Notice from the covered employee or qualified beneficiary should allow the administrator to determine the plan, the covered employee and qualified beneficiaries, the qualifying event or disability, and the date on which the qualifying event occurred. The notice may be provided by the covered employee, a qualified beneficiary with respect to the qualifying event, or any representative acting on behalf of the covered employee or qualified beneficiary.

Administrator's Notice Obligations
Election Notice
The plan administrator is required to notify each qualified beneficiary who is entitled to elect continuation coverage of his or her COBRA rights. This notice should be provided within 14 days after the plan administrator has been notified of a qualifying event. The regulations provide for a special timing rule where the employer is also the administrator of the plan. Under the special rule, an election notice must be furnished not later than 44 days after the date of the qualifying event, or, if the plan provides that COBRA coverage starts on the date of loss of coverage, 44 days from the date the qualified beneficiary loses coverage under the plan. A required notice is considered to be "furnished" by a plan administrator as of the date of mailing, if mailed by first class mail, certified mail, or express mail. If the notice is sent electronically, it is furnished as of the date of electronic transmission.

The election notice shall contain the following information:

1) The name of the plan under which continuation coverage is available; and the name, address and telephone number of the party responsible under the plan for the administration of continuation coverage benefits.

2) Identification of the qualifying event.

3) Identification of the qualified beneficiaries with respect to the qualifying event, and the date on which coverage under the plan will terminate unless continuation coverage is elected.

4) A statement that each individual who is a qualified beneficiary has an independent right to elect continuation coverage. A statement that a covered employee or spouse may elect continuation coverage on behalf of all other qualified beneficiaries. A statement that a parent or legal guardian may elect continuation coverage on behalf of a minor child.

5) An explanation of the plan's procedures for electing continuation coverage, including the time period during which the election must be made, and the date by which the election must be made.

6) An explanation of the consequences of failing to elect or waiving continuation coverage, and a description of the plan's procedures for revoking a waiver of the right to continuation coverage before the date by which the election must be made.

7) A description of the continuation coverage that will be made available under the plan.

8) An explanation of the maximum period for which continuation coverage will be available under the plan, and an explanation of any events that might cause continuation coverage to be terminated earlier than the end of the maximum period.

9) A description of the circumstances under which the maximum period of continuation coverage may be extended due to either the occurrence of a second qualifying event or a determination by the Social Security Administration that the qualified beneficiary is disabled, and the l_ngth of any such extension.

10) A description of the responsibility of qualified beneficiaries to provide notice of a second qualifying event, a determination of disability, or a determination that the qualified beneficiary is no longer disabled.

11) A description of the amount that each qualified beneficiary will be required to pay for continuation coverage.

12) A description of the due dates for payments, the right to pay on a monthly basis, the grace periods for payment, where payments should be sent, and the consequences of delayed payment or non-payment.

13) An explanation of the importance of keeping the administrator informed of the current addresses of all participants or beneficiaries under the plan.

14) A statement that the notice does not fully describe coverage or other rights under the plan, and that more complete information is available in the plan's summary plan description or from the plan administrator. .

Notice of Unavailability of Continuation Coverage
In the event an administrator receives notice from a covered employee or qualifying beneficiary relating to a qualifying event, a second qualifying event, or determination of a disability regarding a covered employee or qualified beneficiary and determines that the individual is not entitled to continuation coverage, the administrator must provide to such individual an explanation as to why the person is not entitled to continuation coverage.
For example, the unavailability notice would be required when it has been determined that no qualifying event had occurred or because the qualifying beneficiary did not furnish the notice in a timely manner. The administrator should provide such unavailability notice within 14 days after receiving notice from the covered employee or qualified beneficiary.

Notice of Termination of Continuation Coverage
COBRA regulations require that the plan administrator provide notice to each. qualified beneficiary of any termination of continuation coverage that takes effect earlier than the end of the maximum period of continuation coverage applicable to the qualifying event. Such notice should contain the following information:

• The reason for early termination of the continuation coverage.
• The date of termination of continuation coverage.
• Any rights the qualified beneficiary may have under the plan or under applicable law to elect an alternative group or individual coverage, such as a conversion right.

This notice should be provided as soon as possible following the administrator's determination that continuation coverage shall terminate. It is recommended that the plan provide the certificate of creditable coverage required under HIP AA at the time the notice of termination of continuation coverage is provided. This will benefit the qualified beneficiary by providing related benefit information in a single information package. This would also benefit the plan as a result of reduced administrative costs.

If you would like a comprehensive resource on COBRA, SESCO has updated their "COBRA Administrative Manual." This manual includes examples of many of the COBRA notices. The manual is available to APRA members for $20. Contact SESCO at (423) 764-4127.