The Department of Labor (DOL) issued and posted on its website new model general and election notices to include explanations on how Medicare interacts with the group health plan continuation coverage requirements set forth in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The enhanced explanation is intended to help qualified beneficiaries decide if COBRA or Medicare (or perhaps both) is the better option.
The DOL has explained that it considers use of these two model COBRA notices as compliant with the applicable notice content requirements. However, as noted below, the model COBRA notices do not include everything required under COBRA regulations, so plan administrators using the DOL model notices without any changes are exposed to potential litigation (which has become a very real risk in recent years). Therefore, the DOL’s model COBRA notices are a good starting point, but they should be supplemented to ensure compliance with the COBRA regulations.
Although there are several required notices under COBRA, the two primary notice requirements are the COBRA general notice (sometimes called the initial notice) and the COBRA election notice. The COBRA general notice must be provided to each covered employee (and his or her spouse) at the outset of plan coverage, and it broadly explains the rights and requirements under COBRA. The COBRA election notice is sent to qualified beneficiaries (i.e., those who have a right to elect COBRA coverage) following a qualifying event. The COBRA election notice explains the COBRA coverage election procedures and also explains the general COBRA rights and requirements to the qualified beneficiary.
The COBRA regulations provide detailed content requirements for both the COBRA general notice and the COBRA election notice. Nevertheless, for years, the DOL has maintained model COBRA general and election notices that are considered by the DOL to be compliant with the COBRA content requirements. The model COBRA notices were updated in 2014 to include information regarding the ACA Marketplaces. The DOL has now issued new model COBRA notices to explain the interaction between COBRA and Medicare.
2020 model notices
Medicare-eligible employees often choose to remain enrolled in their employer’s group health plan rather than enrolling in Medicare Part A or Part B. When a Medicare-eligible employee loses coverage in connection with a qualifying event, the employee can choose to elect COBRA coverage or enroll in Medicare Parts A and/or B (or both). Although Medicare is often the cheaper option, there may be a number of reasons why a qualified beneficiary would prefer COBRA coverage (e.g., health care provider preference, continuity of care, pharmacy benefits, etc.). Coordination between COBRA coverage and Medicare can lead to some surprises for COBRA enrollees, so the new model COBRA notices attempt to provide more clarity by explaining the following:
- Under Medicare rules, Medicare-eligible individuals have an eight-month Medicare special enrollment period beginning on the earlier of the month after their employment ends or the month after group health plan coverage based on current employment ends. This generally means that the eight-month period starts when a Medicare-eligible employee has a COBRA qualifying event due to termination from employment. Loss of COBRA coverage because the COBRA period expires does not trigger a Medicare special enrollment opportunity. If the Medicare-eligible person elects COBRA and does not enroll in Medicare until after the eight-month Medicare special enrollment period, he or she could have a gap in coverage when the COBRA coverage ends and may be subject to a Medicare Part B late enrollment penalty.
- If a Medicare-eligible employee is not enrolled in Medicare at the time of the qualifying event and elects COBRA coverage, the group health plan is permitted to terminate COBRA coverage if the qualified beneficiary later enrolls in Medicare Part A or Part B. If the employee was enrolled in Medicare at the time of the COBRA qualifying event, the employee may elect COBRA and the group health plan cannot terminate COBRA due to Medicare enrollment.
- Where an individual is enrolled in both Medicare and COBRA, Medicare is usually the primary payer under Medicare secondary payer rules.
Litigation risk remains
The DOL considers use of the model COBRA notices to be compliant with the COBRA notice requirements, so employers adopting the model COBRA notice can take some comfort that they would not likely face DOL enforcement actions if the model COBRA notices are properly used. Nevertheless, the DOL’s model COBRA notices do not include all of the information required under the COBRA regulations. The DOL’s position notwithstanding, failure to comply with the COBRA regulations could expose a plan administrator to litigation. Indeed, this is not a theoretical exposure threat—over the past few years, several class action lawsuits have been filed against plan sponsors and administrators based on relatively minor deviations from the COBRA notice content regulations. Some of these lawsuits have resulted in seven-figure settlements.
Given this heightened litigation risk, the best practice is to start with the DOL’s model COBRA notices and then supplement them with the missing information required under the COBRA regulations. When updating their COBRA notices to reflect the new Medicare explanation, plan administrators should consult with benefits counsel to ensure the notices include all of the information required under the regulations.