Miscellaneous Employment Laws
COBRA, Health Care Continuation Coverage Requirements (amended by the Health Insurance Portability and Accountability Act of 1996 (HIPAA))
29 U.S.C. § 1161 et seq., 26 USC § 4980B; 42 U.S.C. § 300-bb-1, et seq.
The Law: This law requires covered employers (20 or more employees) offering group health plans to provide employees and certain family members the opportunity to continue health coverage under the group health plan in a number of instances when coverage would otherwise have lapsed. The employee or qualified beneficiary may be charged 102% of the applicable premium for this benefit.
Notices Required:
There are several different notice obligations under the law. First, a health plan administrator has an obligation under the law to provide a general notice of COBRA rights to an employee and his/her spouse when health coverage begins. Second, the employer of a covered employee must notify the plan administrator within 30 days when a qualifying event occurs. A qualifying event includes:
Third, the qualified beneficiary (employee or his/her spouse or dependent) must provide notice (within 60 days) to the plan administrator of a divorce, legal separation, child losing dependent status, second qualifying event, or Social Security disability determination. Fourth, the plan administrator in turn must notify (within 14 days) the qualified beneficiary ((notice to spouse covers dependents residing with that spouse) of his/her COBRA rights. See 29 CFR § 1166 for further permutations of the rules, for example, how determination of disability affects the timing under the third notice requirement.
Qualified beneficiaries have 60 days to elect continuation coverage. The maximum period that this continued coverage must be provided is generally 18 months, but in some cases it is 36 months. Under a new law (The Trade Act of 2002) there will be a second 60 day election period for individuals who become eligible for trade adjustment assistance.See the proposed regulations linked below.
The employer must keep detailed records of COBRA notifications, including the dates sent, and detailed records of COBRA rejections or acceptance. See the Benefits Link COBRA questions and answers column for suggestions on recordkeeping under COBRA. Failure to comply with the law subjects the employer to excise taxes, in addition to damages under ERISA, as well as possible attorney's fees and the liability for any of the beneficiary’s medical expenses that were due to the gap in coverage.
For an example of how one university employer utilizes the web as a supplement to getting the required notice information to their employees see the University of California Continuation of Group Insurance Coverage Web Page.
Veterans' Benefit Improvement Act of 2004
This law increases from 18 to 24 months, the period of employer sponsored health coverage that an employee covered by USERRA may elect, by amending section 4317 of USERRA which provides for health benefit contination coverage for those employees serving in the military, even if not covered by COBRA. The extension of the coverage period under the new act applies to all continuation elections made after December 10, 2004. For more on this see the Jackson Lewis article entitled Veterans' Benefits Improvement Act of 2004 creates new responsibilities from Employers.
Final Rules on COBRA Notice Procedures
69 Fed. Reg. 30083 (May 26, 2004) amended at 69 Fed. Reg. 34920 (June 23, 2004)
These final regulations on Health Care Continuation Coverage Notice requirements apply to notices that must be sent out on or after the first day of the first plan year on or after Nov. 26, 2004, so for calendar year health plans, this means January 1, 2005. There are a number of changes between the proposed and final rules.
The new rules require Plan Administrators to take the following steps:
Generally, the initial notice 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 on which the plan first becomes subject to the continuation coverage requirements; or (2) the date on which the administrator is required to furnish an election notice to the employee or to his or her spouse or dependent. The new regulations clarify that where an individual is required to be furnished an election notice within the 90-day period for furnishing general notices, the plan administrator may satisfy its general notice obligation by furnishing an election notice in accordance with the final regulation. The notice must include the name of the plan and a contact (name, address and phone number) for further information.
The DOL has modified the proposed regs to eliminate the requirement that the notice describe how
qualified beneficiaries who are receiving continuation coverage must provide notice of a second qualifying event. If the summary plan description is furnished at a time that would satisfy the notice requirements for the general notice, and contains the required information, the notice requirements will be deemed to have been met.
On the issue of employee notice to the employer of a qualifying event, the final regs provide that, for any plan under which continuation coverage begins with the date of loss of coverage, the 30-day period for providing the notice of qualifying event must also begin with the date of loss of coverage, rather than the date of the qualifying event. A plan's procedures for qualified beneficiary notices that must be given to the employer generally will be considered reasonable if they are described in the plan's SPD, 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.
The employer must give the beneficiary at least 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: (1) The date of the qualifying event; (2) the date on which there is a loss of coverage; or (3) 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.
Section 606(a)(2) of ERISA requires an employer to provide notice to the plan administrator of a qualifying event that is either the employee's termination of employment or reduction in hours of employment, the employee's death, the employee's becoming entitled to Medicare, or the commencement of a proceeding in bankruptcy with respect to the employer. This section of the final regulation was not changed from the proposed regulation.
Upon receipt of a notice of qualifying event, the administrator shall furnish to each qualified beneficiary, not later than 14 days after receipt of the notice of qualifying event, notice that meets a list of 14 requirements spelled out in the final regulations [see page 30104 of the regs at (b)(4)]. The preamble to the regulations states that a required notice generally should be considered "furnished" by a plan administrator as of the date of mailing, if mailed by first class mail, certified mail, or Express Mail; or as of the date of electronic transmission, if transmitted electronically.
Model Notices are included in the Rules, however, there is no model notice for the two new notices; one for unavailability of coverage and the other for termination of coverage. See the Seyfarth Shaw Management Alert: New COBRA Notice Procedures Will Soon Apply . See also Jackson Lewis Newsletter on the final regulations.
Note that the final model election notice published in May provided that COBRA coverage would be terminated before the end of the maximum coverage period if, among other things, "a covered employee becomes entitled to Medicare benefits (under part A, Part B, or both)" after electing COBRA. The term "covered employee" is incorrect, and the June 23, 2004 correction replaces it with the term "qualified beneficiary."
Model General Notice of COBRA Continuation Coverage Rights
Model COBRA Continuation Coverage Election Notice
Frequently Asked Questions about COBRA Continuation Coverage
HIPAA Amendments to COBRA:
Disability. Prior to the 1996 amendments enacted pursuant to HIPAA, the COBRA rule required that the 18-month maximum coverage continuation period is extended to 29 months if the qualified beneficiary is determined under the Social Security Act to have been disabled at the time of the qualifying event. Effective January 1, 1997, if the disability exists at any time during the first 60 days of COBRA coverage, then the 29-month period applies. The new law clarifies that the 29-month period also applies to a non-disabled qualified beneficiary of the covered employee.
Newborns and adoption. Also effective January 1, 1997, a newborn infant or child placed for adoption with the covered employee during the period of COBRA coverage will be entitled to receive COBRA continuation coverage as a qualified beneficiary. Under the prior law, individuals who became dependents after the qualifying event were eligible for coverage, but did not acquire the rights of other COBRA beneficiaries. If a dependent child was added during the first 18 months of COBRA coverage and coverage is in effect on January 1, 1997, the child will become a qualified beneficiary on January 1, 1997.
Pre-existing condition exclusion. HIPAA modifies the law with respect to the early termination of COBRA coverage for individuals who are covered under another group health plan. Coverage may be cut short even if the new plan has a pre-existing condition exclusion unless the exclusion applies to a condition for which they receive treatment.
Notification. All current COBRA beneficiaries must be notified of the new law by November 1, 1996.
Selected Case Law Under COBRA:
Geissal v. Moore Medical Corp., 524 U.S.74 (1998). In Geissal, the Supreme Court held that an otherwise eligible beneficiary who is covered under another group health plan at the time of his/her COBRA election could not be denied COBRA continuation coverage. In order for the beneficiary to become ineligible for continuation coverage, the event of becoming covered by another plan is significant only if it occurs, and "first" occurs, at a time after the date of the election. See also IRS Announcement 98-22 (in accord), which was issued in March 1998, and reversed a longstanding IRS position.
For an overview of HIPAA and COBRA, see IRS Notice 98-12.