Employee Benefits Alert
Yesterday the Department of Labor (“DOL”) released four model notice “packages” that may be provided to individuals who, under the American Recovery and Reinvestment Act of 2009 (“ARRA”), must be notified about the availability of premium reductions and additional election periods for health care continuation coverage. An explanatory statement provides some additional guidance, but there are still a number of unanswered questions raised by the notice packages.
ARRA, signed by President Obama on February 17, 2009, provides for a 65% premium reduction (“subsidy”) for certain qualified individuals who lost (or will lose) coverage under an employer-sponsored group health plan in connection with an involuntary termination of employment that occurred between September 1, 2008, and December 31, 2009. The subsidy is available for up to nine months for qualified individuals who elect continuation coverage under COBRA or a comparable state program (e.g., a similar state statute that applies to COBRA-exempt small employers with less than 20 employees).
ARRA also provides a special election for individuals who became eligible for COBRA since September 1, 2008, but who either did not enroll or did enroll but subsequently let coverage lapse. Such individuals will have an additional 60 days from the date the employer sends notice of the special election period (required to be sent by April 18, 2009) to enroll in COBRA. For individuals who make such an election, coverage will be retroactive to March 1, 2009. For additional information about the subsidy in general, see our client alert dated February 13, 2009.
There are a few distinct requirements imposed by ARRA to notify individuals about the subsidy and special election, and using an applicable DOL model notice package will be deemed to satisfy the content requirements for the notices. All of the packages contain certain general information and administrative forms, including a summary of the subsidy provisions under ARRA, a form to request the subsidy, and (if applicable) COBRA election forms and information. The following is an overview of the four model notices. (Each of the headings is a link to the corresponding notice package.)
General Notice - Full Version
Employers subject to the federal COBRA provisions must send the General Notice to all qualified beneficiaries who experienced any qualifying event between September 1, 2008, and December 31, 2009, not just those who were involuntary terminated from employment and are therefore eligible for the subsidy. This full version includes information on the premium reduction as well as information required in the standard COBRA election notice. Providing this notice will satisfy the content obligations under both existing COBRA rules and ARRA.
General Notice - Abbreviated Version
The Abbreviated Version of the General Notice includes the same information as the Full Version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. It may be sent in lieu of the Full Version to individuals who experienced a qualifying event since September 1, 2008, and are currently enrolled in COBRA.
Insurance issuers that provide group health insurance coverage must send the Alternative Notice to all individuals (i.e., employees and dependents) who became, or will become, eligible for continuation coverage under a state law between September 1, 2008, and December 31, 2009. Continuation coverage requirements vary among states, and insurers should modify this model notice as necessary to reflect the applicable state law. Insurers may also use the General Notice, Abbreviated Version as appropriate.
Extended Election Notice
Employers subject to the federal COBRA provisions must send the Extended Election Notice to any individual who had a qualifying event between September 1, 2008, and February 16, 2009, and either did not elect COBRA continuation coverage or elected COBRA but subsequently let it lapse. This notice includes information on ARRA’s special election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.
ARRA does not require the extended election period for individuals covered under state continuation laws. Congressional guidance, issued in the form of frequently asked questions, indicates that individual states may choose, but are not required, to offer such extended election periods. Thus, in the state continuation coverage context, the responsible entity (typically the insurance company) will need to confirm whether the specific state at issue has chosen to provide for a second election. For example, the New Hampshire Insurance Department issued a bulletin last week indicating that a second election period will be required with respect to its state continuation law. The Ohio Department of Insurance, on the other hand, released guidance providing that the state will not impose a similar special election period. Unfortunately, however, most states have yet to take a formal position on this issue. If a state does decide to offer a special election, that information should be provided in the Alternative Notice that must be sent by insurers.
Summary of Which Notice to Provide
Insurers that are responsible entities will generally send the Alternative Notice, although states may impose additional requirements. The following is intended to help employers subject to federal COBRA determine which notice must be provided:
1. Did the individual have a qualifying event between September 1, 2008, and December 31, 2009?
a. No - none of these notices is required to be sent
b. Yes - continue to Question 2
2. Has the individual already received a COBRA notice?
a. No - send the General Notice, Full Version within 44 days of the qualifying event
b. Yes - continue to Question 3
3. Is the individual currently enrolled in COBRA?
a. Yes - send the General Notice, Abbreviated Version (due date unclear)
b. No - continue to question 4
4. Was the individual enrolled in COBRA on February 17, 2009?
a. Yes - it is unclear which notice should be provided to an individual who had COBRA coverage on February 17, 2009 and is otherwise eligible for the subsidy, but has subsequently let coverage lapse
b. No - continue to question 5
5. Was the individual involuntarily terminated from employment and became eligible for COBRA since September 1, 2008?
a. Yes - send the Extended Election Notice
b. No - it is unclear which notice should be provided to an individual who had a qualifying event since September 1, 2008, that did not result from involuntary termination of employment, but who is not currently enrolled in COBRA.
ARRA requires that individuals in category 5.b. above receive notification of certain information about the subsidy. The DOL’s explanatory statement seems to indicate that the General Notice, in some form, must be provided to such individuals. However, the content of the notice package does not seem to apply in this situation. For example, it does not make sense to send a COBRA election form and information about making a COBRA election to individuals who are not eligible to elect coverage at this time.
Another open question is what to do for an individual who has already received a COBRA notice but whose original 60-day election period has not yet expired. The DOL’s explanatory statement indicates that if the original notice that was sent to such an individual did not include information about the subsidy (and any notice sent before February 17, 2009, would not have), the notice is incomplete. Such an individual needs to be given a new notice and the 60-day election period will restart beginning the date the plan administrator sends the new notice. Presumably, if the individual elects COBRA, coverage will be retroactive to the date the individual lost coverage as a result of the qualifying event. However, it’s unclear exactly what information now has to be provided to an individual in that situation.
The election forms that are included in the notice packages raise a number of additional questions. Hopefully these and other open issues will be addressed in subsequent guidance.
Insurers are also raising questions about the state law notice requirements. Some states have informally indicated that the employer must provide notice about the subsidy. However, it is unclear whether such notice will satisfy the insurer’s responsibility at the federal level.
Additional Agency Activity
The DOL has made other information regarding the subsidy available on a new COBRA page on its website, including some Frequently Asked Questions for Employers. The IRS also has a dedicated COBRA page (click on Update on Recovery Tax Provisions for Individuals and Businesses) that was significantly reorganized earlier this week. We are also expecting to see a Notice from the Treasury Department with a number of questions and answers, which may be published as soon as next week. We will continue to provide updates as they are available.
For more information, please contact any of the following lawyers:
Michael Lloyd, firstname.lastname@example.org, 202-626-1589
Garrett Fenton, email@example.com, 202-626-5562
Gary Quintiere, firstname.lastname@example.org, 202-626-1491