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PPACA and COBRA Updates

Source: United Benefit Advisors (UBA)

The regulatory agencies have recently issued two sets of guidance that affect an employer’s Consolidated Omnibus Budget Reconciliation Act (COBRA) obligations and opportunities under the Patient Protection and Affordable Care Act (PPACA).

Special Enrollment for COBRA Beneficiaries

Under the Marketplace special enrollment rules, a person who has a COBRA qualifying event may enroll in a Marketplace policy as a special enrollee when the person first becomes eligible for COBRA.  A qualified beneficiary also may enroll mid-year as a special enrollee when COBRA expires.  In both of these situations, the person is eligible to apply for a premium subsidy. However, a qualified beneficiary may not drop COBRA part way through the coverage period to enroll in Marketplace coverage – unless he or she does so during open enrollment.

The regulatory agencies were concerned that qualified beneficiaries did not understand these rules and therefore the federally-facilitated Marketplaces are offering a special enrollment period until July 1, 2014.  According to guidance issued by the Department of Health and Human Services (HHS) on May 2, 2014, during this special enrollment period qualified beneficiaries may drop COBRA and enroll in the federal Marketplace.  (State-run Marketplaces may, but are not required to, offer this special enrollment period.)  Employers are not required to notify qualified beneficiaries of this special, extended enrollment period, but they may wish to do so.

Updated COBRA Notices

The Department of Labor (DOL) has updated both the model General Notice of COBRA Continuation Rights and the model COBRA Continuation election notice to include information about the Marketplace.  The model general notice now includes basic information about Marketplace coverage and includes a Web address the participant can consult for more information. The model election notice, which was revised in 2013 to include information about the Marketplace, has been revised again to include more detailed information about Marketplace coverage, rules, and options. Employers are not required to re-distribute the General Notice, but they may wish to provide it as part of the next open enrollment period to help ensure that individuals who become COBRA-eligible consider the possibility of purchasing Marketplace coverage, rather than COBRA.

The election notice still must be provided to new qualified beneficiaries within 14 days after the plan administrator is notified that a qualifying event has occurred.  There is also a 30-day period for an employer to notify the plan administrator that a qualifying event has occurred, so in many cases the notice does not need to be given until 44 days after the qualifying event.  Employers may wish to provide election notices well before the deadlines to give qualified beneficiaries adequate time to choose between COBRA and Marketplace coverage, since the special enrollment period for Marketplace coverage ends 60 days after employer-provided coverage ends.

There is no deadline to begin using the updated notices, but employers should begin using them as soon as they can. The notices are models, so the employer may modify them to better fit its situation.