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A Service of OnQue Technologies, Inc. |
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Communication Is Crucial For Effective COBRA Administration |
November 7, 2003
Santa Rosa, CA |
We can't think of any federal benefits laws that impose on the parties the duty to keep each other
informed to the extent that COBRA regulations do. Employers, plan administrators, and qualified
beneficiaries each have legal obligations to impart specific information within strict time limitations.
A breakdown of communication anywhere in the process of administering COBRA benefits can, and often does,
result in penalties and litigation. This COBRA Tip explores the most common requirements for
communication of COBRA rights and obligations.
Communications From Employers And
Plan Administrators:
Summary plan description: The Summary Plan Description (SPD) is a document mandated by the Employee Retirement Income
Security Act (ERISA) to provide the average plan participant with information about rights
and duties under your benefits plan, including COBRA rights. All SPDs for calendar year plans
should have been amended as of January 1, 2003 to comply with new DOL regulations requiring a
detailed and easily understood description of COBRA rights. You must provide a current SPD to all
plan participants and beneficiaries at the time they become a participant or beneficiary under
your plan, and any other time that one is requested. Separate documents must be sent to spouses
if SPDs are provided to employees only at the work site.
Employer's Responsibility. Although it is common practice to rely on insurance carriers to
provide plan documents, the ultimate responsibility for accurate and up-to-date SPDs remains with the
employer. The newly proposed DOL regulations, if passed, would permit the use of an SPD in lieu of the
COBRA general notice if it satisfies the content requirements of both documents, but we do not
recommend eliminating the use of the COBRA general notice. You may be liable for errors and omissions
in your SPD and be required to live up to the incorrect information as presented. It is always safer
to tailor COBRA notices to your specific plans and participants.
General COBRA Notice: The initial notice (or general notice, as it is now called by the
DOL) must be sent to employees and their spouses who are covered under your group health plan at
the time their coverage begins, and at any time thereafter if the plan is modified and COBRA rights
are affected. The newly proposed DOL COBRA regulations specify that the general notice must be
furnished within 90 days of the date on which the covered employee or covered spouse first become
covered under the plan.
The general notice informs plan participants of specific rights if health coverage is lost due
to a qualifying event, such as termination or reduction in hours. It must include information about:
qualifying events, qualified beneficiaries, maximum coverage period, premium payments,
available coverage, election rights, extending COBRA coverage and adding dependents. The DOL,
which regulates COBRA notices, provided a generic model notice in its proposed regulations, but just
as with SPDs, there are inherent dangers in using one-size-fits-all COBRA notices.
COBRA Election Notice: Employers are required to provide notice to plan administrators
when a COBRA qualifying event occurs. This notice must be made no later than 30 days after the employer
learns of the event. In turn, the plan administrator must provide notice of COBRA election rights to
all qualified beneficiaries within 14 days after being notified of a qualifying event. In the newly
proposed regulations, the DOL has clarified that when the employer and the plan administrator are
the same entity, the election notice must be provided within 44 days of the event. Election notices
must:
- State the names and contact information
for plan administrators; identify qualified beneficiaries; describe the qualifying event and type
of continuation coverage being offered; and set out the manner in which the qualified beneficiaries'
COBRA rights must be exercised.
- Clearly state that each qualified beneficiary has an independent
right to elect continuation coverage.
- Explain the plan's payment requirements,
payment schedule and payment policies, including grace periods and the consequences of
late payment or nonpayment.
- Describe the alternate coverage or
conversion options that the plan may provide, and explain how choosing them would affect
continuation coverage rights.
- Specifically state that it does not
fully describe continuation 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.
- Inform qualified beneficiaries of the consequences of not electing continuation coverage
under the plan.
- Provide information regarding the
possible extension of coverage due to disability or second qualifying events, including detailed
instructions on the notices that must be provided by qualified beneficiaries.
Early termination notice:
Under the proposed DOL regulations, you would be required to provide all affected qualified
beneficiaries with a specific notice when COBRA coverage is terminated before the end of the maximum
coverage period. For example, if you terminate COBRA coverage due to nonpayment of the COBRA premium
or because payment is received after the last day of the grace period, you would need to provide the
early termination notice as soon as practicable after the decision to terminate COBRA early is made.
It must explain why and when the coverage is being terminated and describe any rights to other coverage
that may be available.
Ineligibility for continuation coverage notice:
Under the proposed DOL regulations, if an employee or family member who is not eligible to receive COBRA
coverage notifies you of a qualifying event, you would be required to inform that person why he or she
is not entitled to COBRA coverage.
HIPAA Certificate of Creditable Coverage:
The Health Insurance Portability and Accountability Act requires plans to provide proof of prior
creditable coverage whenever a participant loses group coverage. A HIPAA Certificate of Coverage contains
the dates of that participant's coverage and is used by the recipient to acquire other coverage without
being subject to prior preexisting conditions exclusions. You must provide a Certificate of Creditable
Coverage to a plan participant when a COBRA qualifying event occurs, and to a COBRA beneficiary when
COBRA coverage ends for any reason.
FMLA: Leaves of absence under the Family
Medical Leave Act are not COBRA qualifying events because the employee on FMLA leave may not be dropped
from group coverage. However, a COBRA event does occur if the employee does not return to work at the
end of the leave period. At that time, you must provide a COBRA election notice. (If the person on FMLA
leave notifies you prior to the end of that leave that she does not intend to return to work, a COBRA
event has occurred as soon as that person loses coverage under the group health plan.)
Medical Child Support Orders:
Medical child support orders are issued by courts and authorized administrative agencies, usually as part
of domestic relations or custody proceedings. They provide for group health care coverage for children of
plan participants, and you are required to immediately enroll such a child in your group health plan.
Once on the plan, that child is considered a participant and is entitled to receive documents such as
SPDs and COBRA notices when appropriate.
Communications From Qualified Beneficiaries:
Multiple qualifying events.
When certain events occur, spouses and dependent children of qualified beneficiaries may be eligible to
extend their maximum COBRA coverage periods. These events, known as second, or multiple qualifying events are:
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Death of the employee;
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Divorce or legal separation from the employee;
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Employee's entitlement to Medicare coverage;
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A dependent that ceases to be eligible for plan coverage; and
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Disability of any qualified beneficiary
Medicare entitlement.
Qualified beneficiaries or their representatives must notify you immediately if the covered employee
becomes entitled to Part A or Part B of Medicare. Although not spelled out in current regulations, the
proposed rules require a 60-day minimum time for giving notice of a divorce or legal separation, death of the
employee, or when a child is no longer eligible as a dependent under your plan. This 60-day time period for the
submission of information from qualified beneficiaries is a minimum period; plans may provide for longer notice
periods.
Disability.. In the case of a qualified
beneficiary's disability, you must be notified of the determination of disability by the Social Security
Administration (SSA) no later than 60 days after the date of the determination and before the 18-month
COBRA period expires. And if the beneficiary is determined by the SSA to be no longer disabled, you must
be notified of that fact within 30 days of the determination.
Change of address. All qualified beneficiaries
must inform you immediately of a change of address.
Conclusion:
If you fail to carefully follow the requirements for communicating information regarding COBRA rights,
you are at risk of being sued and you may be assessed fines and penalties for improper
COBRA administration. Qualified beneficiaries can lose rights to which they are entitled if
they do not inform you of certain events and, under the proposed DOL regulations, you must
establish "reasonable" procedures for the furnishing of notices by covered employees and
qualified beneficiaries. |
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How COBRA OnQue Software Handles These Issues: |
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COBRA OnQue provides an election notice that conforms to the requirements of the newly
proposed COBRA rules.
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A Certificate of Creditable Coverage is automatically generated when coverage is lost.
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COBRA OnQue software automatically administers multiple qualifying events for qualified beneficiaries.
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| Related COBRA
Tips |
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New COBRA Notice Rules
Proposed By Labor Department |
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Description of COBRA Rights Must Be Included In SPD |
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FMLA and COBRA: How Do They Interact? |
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This information is provided by
OnQue Technologies, Inc. for educational purposes only and does not constitute
legal advice. If legal advice or other professional assistance is required, the
services of a competent professional should be sought.
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