Contact: Ken Mason; Spencer Fane Britt & Browne LLP (Missouri, USA)
With the close of the first open enrollment period for obtaining health coverage through the Exchanges (or “Marketplaces”), the federal agencies charged with administering the Affordable Care Act (“ACA”) have turned their attention to various “clean-up” changes. Of particular interest to sponsors and administrators of employer group health plans are revised versions of the model COBRA and CHIPRA notices. Moreover, current COBRA beneficiaries have been given a special one-time window in which to enroll in Marketplace coverage.
The revised notices and special enrollment period are discussed in the latest round of tri-agency FAQs (Part XIX), proposed Department of Labor Regulations, and a Bulletin issued by the Centers for Medicare and Medicaid Services (“CMS”), all of which were made public on May 2, 2014.
Model COBRA Notices
Administrators of health plans that are subject to the federal COBRA rules are required to issue a number of notices. These include a “general notice” when an individual first becomes covered under the plan, and then an “election notice” when the individual experiences a COBRA qualifying event. Model versions of both notices were first issued in 2004.
The model election notice was revised approximately one year ago. This was at the same time the agencies issued two different versions of yet another required notice – this one designed to inform employees of the availability of coverage through a Marketplace. These Marketplace notices were discussed in our May 10, 2013, article. Neither version of the Marketplace notice has been revised, so employers should continue to provide one of these two notices to all employees within 14 days of their hire date.
The COBRA election notice was revised at that time to include a brief reference to Marketplace coverage (even though the Marketplaces had not yet opened for business). The DOL now believes that both the general and election notices should discuss the Marketplace coverage alternative. Revised versions of these COBRA notices (which are available on the DOL website) are designed to do that. Although the revised general notice contains only a few brief references to the Marketplace alternative, the revised election notice devotes multiple pages to this topic.
For instance, the revised election notice describes the limited opportunities to move from COBRA coverage to Marketplace coverage. An individual who experiences a COBRA qualifying event may elect to purchase Marketplace coverage in lieu of COBRA coverage (in view of the fact that all of the COBRA qualifying events also constitute special enrollment events under the Marketplace rules). Otherwise, an individual who elects COBRA coverage may purchase coverage on a Marketplace only when that COBRA coverage is exhausted (i.e., at the end of the maximum 18- or 36-month period), during an annual Marketplace enrollment period (with the next such period set to begin on November 15, 2014), or if they experience some other Marketplace special enrollment event (such as marriage or childbirth).
The revised COBRA election notice also discusses the potential advantages of electing Marketplace coverage instead of COBRA coverage. These include the availability of federal tax credits to help pay the premiums for Marketplace coverage, as well as potential cost-sharing reductions (such as lower deductibles, co-payments, and coinsurance amounts). Of course, Marketplace coverage is also available without regard to medical underwriting, and with no preexisting condition limitations or exclusions.
In view of these potential advantages of Marketplace coverage, why would anyone still choose to elect COBRA coverage? There are a number of possibilities.
- First, the individual may not qualify for the premium subsidies or cost-sharing reductions. The premium subsidies are available only if an individual’s total household income does not exceed 400% of the Federal Poverty Level, and the cost-sharing reductions are phased out at 250% of the Federal Poverty Level.
- Alternatively, an individual who has satisfied a substantial portion of an annual deductible or out-of-pocket maximum under an employer plan may wish to elect COBRA coverage for the remainder of that plan year to avoid having to satisfy a new deductible or out-of-pocket maximum for that same year.
- Finally, an individual may miss a special enrollment deadline for Marketplace coverage, but still be eligible to elect COBRA coverage. This is because the deadline for electing Marketplace coverage is 60 days after the event giving rise to the special enrollment right, rather than 60 days after the individual is notified of his or her right to elect COBRA coverage.
As under prior guidance, there is no legal obligation to use these model COBRA notices. However, any administrator who uses these revised notices (tailored, as appropriate, to fit specific plan provisions) will be deemed to have complied with the notification requirements. Accordingly, administrators that have previously relied on the DOL model notices should immediately begin using these revised models, instead.
Special Enrollment Period for COBRA Beneficiaries
As noted above, an individual who is purchasing COBRA coverage may not simply drop that coverage and move to a Marketplace plan at any time. This must be done either when COBRA has been exhausted, during an annual Marketplace enrollment period, or following another Marketplace special enrollment event. CMS is concerned, however, that prior versions of the model COBRA election notice did not sufficiently describe these restrictions.
As a result, the CMS Bulletin announces a one-time special enrollment period for current COBRA beneficiaries. Any such beneficiary has a period of 60 days from the date of the CMS Bulletin (or until July 1, 2014) to drop COBRA coverage and enroll in a plan purchased through a federally facilitated Marketplace. (It is not yet clear whether states that operate their own Marketplaces will follow CMS’s lead in this area.) The Bulletin explains that an individual should call the Marketplace call center at 1-800-318-2596 if they wish to take advantage of this opportunity.
Although not required to do so, sponsors of health plans may wish to advise their current COBRA beneficiaries of this one-time Marketplace enrollment opportunity (which is not referenced in even the revised notices).
Revised CHIPRA Notice
As explained in our February 27, 2009, article, the Children’s Health Insurance Program Reauthorization Act of 2009 (“CHIPRA”) expanded both Medicaid and the Children’s Health Insurance Program (“CHIP”) by allowing states to use Medicaid or CHIP funds to subsidize premiums paid for coverage under employer-sponsored plans. Employers having employees in any of the states that offer such subsidies are required to notify their employees of this option. Our March 1, 2010, article discussed a model CHIPRA notice that was drafted and released by the DOL for this purpose.
In view of the Marketplace alternative, that model CHIPRA notice has also been revised. The opening paragraph of the notice now explains that individuals who are not eligible for Medicaid or CHIP may still be able to purchase coverage through a Marketplace. For additional information, they are referred to www.healthcare.gov.
The CHIPRA notice must be provided annually, before the beginning of each plan year. Employers that are subject to this CHIPRA notification requirement should now substitute this revised CHIPRA notice for the version they have been using.
