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U.S. Department of Labor
Employee Benefits Security Administration
May 2003
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Many Americans may need temporary continuation of group
health benefits when coverage would be lost due to job loss, death, or
divorce. The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires
most group health plans to give workers and their families the opportunity
to continue their group health coverage for up to 36 months in certain
situations where the coverage would otherwise end. The Labor Department’s
Employee Benefits Security Administration (EBSA) has proposed rules to
provide uniformity and clarity on the various notices that the law requires
to be furnished by employers, plan administrators, workers and their
families.
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COBRA gives certain former employees,
spouses, and dependent children the right to temporarily continue health
coverage at group rates when coverage is lost due to certain specific
events.
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Qualified individuals who elect
continuation coverage may be required to pay for the cost of such
coverage, up to a maximum of 102% of the cost to the plan.
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Events that trigger COBRA coverage
include termination of employment or reduction in hours worked, death of
an employee, divorce or legal separation from a spouse, and losing
status as a dependent under a group health plan. These are called
"qualifying events" if they cause the employee or family
members to lose group health coverage. COBRA requires specific notices
about COBRA rights to be provided by employers, plan administrators,
employees and beneficiaries before employees and beneficiaries can elect
COBRA continuation coverage.
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Notices required under COBRA include
the —
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General notice given to employees
and their spouses when they become covered by a plan.
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Notice of a qualifying event
furnished to plans by employees or beneficiaries in the case of
divorce, loss of status as a dependent, and by employers in the case
of any other qualifying event.
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Election notice given by plans to
individuals entitled to elect COBRA.
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Although the Department of the
Treasury has interpretive authority for the substantive COBRA rights,
the Labor Department has interpretive authority over the notice and
disclosure provisions of COBRA. The Labor Department published Technical
Release 86-2 in 1986 providing guidance on the general notice and a
model general notice that have since become outdated because of
amendments to COBRA.
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Under the proposed regulations, the
general notice would cover the basic information on COBRA that employees
and their families need to know to protect their rights before a
qualifying event occurs.
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The notice would be furnished to
qualified individuals within 90 days after coverage begins.
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Plans could satisfy this notice
requirement by including the required information in the summary plan
description (SPD) and furnishing the document within the 90-day time
limit.
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The proposal also includes a revised
model general notice to make it easier for plan administrators to comply
with the notice requirements.
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Employers must notify plan
administrators of certain types of qualifying events, such as loss of
job, reduced working hours, death of the employee, and enrollment of an
employee in Medicare.
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The proposal clarifies the required
timing and content of the notice of a qualifying event.
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Employees or their family members must
notify plan administrators of other types of qualifying events --
divorce or legal separation and loss of dependent status under the plan.
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The proposal clarifies the content and
timing of this notice.
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The proposal would require plans to
have reasonable procedures for requiring employees and their families to
give this notice and for setting time limits as to when it must be
given. Plans would be required to accept notices that meet the minimum
content requirements of the proposal.
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Under the proposal, the COBRA election
notice would contain all of the information individuals need to decide
whether to elect COBRA coverage.
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The election notice would have to
describe available health plan options, premium payment requirements,
the consequences of failing to elect COBRA, and how COBRA coverage could
be extended due to disability or a second qualifying event.
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The proposal also contains a model
election notice that plans could use to comply with the election notice
requirement.
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After receiving a notice of qualifying
event from an employee or family member, plans would be required under
the proposal to notify individuals whenever a plan determines that an
individual is not eligible for COBRA.
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The proposal would also require plans
to notify individuals when their COBRA coverage is terminated earlier
than the full time period for which COBRA must be made available.
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For questions about the proposed regulation, contact
EBSA’s Office of Regulations and Interpretations at 202.693.8523.
Publications on COBRA may be obtained on EBSA’s Web site at www.dol.gov/ebsa
under Publications and Reports.
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