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Updates to Model COBRA Election Notice

The Department of Labor (DOL) recently updated its Model COBRA Continuation Coverage Election Notice.  The newly-revised Notice now includes language to make qualified beneficiaries aware of alternate coverage options that will be available via state insurance exchanges or marketplaces.   


COBRA refers to a long-standing federal law that helps employees and covered dependents maintain the same health care coverage that had been in place on the day before a triggering "qualifying event".  COBRA coverage tends to be elected by individuals with health issues who need to secure coverage.  Although COBRA served an undeniably helpful role to bridge individuals to new sources of health coverage (COBRA expired generally after 18, 29 or 36 months), it was expensive.  Under applicable rules COBRA would only be available by paying a monthly premium equivalent to the full cost of health coverage, plus a maximum two percent administrative charge. 

COBRA Qualifying Events

  • Termination (voluntary or involuntary) - for reasons other than gross misconduct
  • Reduction in hours of employment
  • Divorce or legal separation
  • Loss of dependent child status
  • Death of the covered employee
  • Covered employee's entitlement to Medicare*
    • Typically, this will not be a qualifying event for spouses and dependent children of active employees due to the Medicare Secondary Payer Rules.

What is changing?  

Although the new sample Notice is posted on the DOL website, most employers may not want to use the document in its original form.  Instead the Notice should be tailored to include your plan-specific information.  When appropriately completed, the Notice is considered to be good faith compliance with that notification requirement under COBRA.  If you outsource your COBRA administration, be sure to check that your vendor is using the most current version of the Notice.

Many employers have historically chosen not to use the DOL Model Notice because the wording skews COBRA rights strongly in favor of the continuation coverage user, at the expense of the employer's otherwise applicable rights. 

Although COBRA strictly requires important notices, plan sponsors have significant latitude in designing their COBRA notice.  Many plan sponsors will integrate COBRA procedures that impose specific obligations on the person electing COBRA.  For example, an employer could require written notice of COBRA by issuing a notice with procedures declaring that obligation on the COBRA elector.  By using the model notice, an employer would forgo the option of requiring written notice.  Numerous other fully compliant procedural COBRA usage options are possible. 

Concluding thoughts 

In 2014 we anticipate that the COBRA landscape will change significantly.  As noted above, by electing COBRA coverage an individual cannot be denied health coverage based on preexisting condition exclusions.  In 2014, although the technical obligation to offer COBRA is not going away, it is expected that the opening of alternate sources of coverage and the comprehensive elimination of preexisting condition exclusions will erode COBRA appeal - particularly in light of the significant expense associated with buying COBRA coverage. 

We believe that in 2014, as COBRA "luster" wears away, many employers may find that using the DOL's newly revised COBRA Model Notice might offer a helpful solution.  While some organizations may still prefer to retain the discretion to impose an array of procedural requirements on how COBRA is elected and used, other companies may find that maintaining such detailed procedures is no longer worthwhile.  We suggest you discuss your options for your group health plan with your local HUB International representative.

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