Document Archive > COBRA Notices and ACA-Related Guidance

In Brief

On May 2, 2014, the Departments of Labor, Health and Human Services, and Treasury (the Agencies) issued proposed rules as well as FAQs involving modifications to COBRA Notices, adding new language about “Exchange Options.” The FAQs also contain changes to out-of-pocket limits, preventive care services, and other Affordable Care Act (ACA) provisions. The purpose of this Memorandum is to provide guidance related to these FAQs.

COBRA Notices

1. The General Notice. Once an individual becomes covered under a group health plan, the plan sponsor must provide a General Notice explaining the participant’s COBRA rights. In order to provide additional information about the Exchange options and special enrollment rights under the Exchanges that may be available to qualified beneficiaries, the DOL has issued new model General and model Election Notices contemporaneously with the new proposed COBRA regulations.

The proposed COBRA regulations eliminate the current versions of the model General and Election Notices.  The original model Notices were issued in 2004. You can download the updated model General Notices and Model Election Notices on the DOL’s website in modifiable, electronic form at www.dol.gov/ebsa/cobra.html

2. Election Notices. The DOL also provides a new model Election Notice. The plan sponsor must add the specific plan data as in the previous model. As with the General Notice, plan sponsors may continue to use the existing form or implement the proposed Election Notice.

3. Special Open Enrollment Period. Individuals who are eligible for COBRA coverage will be entitled to elect special enrollment in coverage on the Exchange in the following two instances:

·        When an individual is first eligible for COBRA due to a loss of other minimum essential coverage; and

·        When an individual’s COBRA coverage is exhausted. 

·        For someone who elects COBRA coverage following a qualifying event, this means that such individual would not be able to enroll in potentially cheaper or subsidized coverage on the Exchange until open enrollment or until the individual incurs another special enrollment event. 

On May 2, 2014, HHS released guidance providing for a limited Exchange special enrollment period for individuals currently eligible for or enrolled in COBRA coverage.  In its guidance, HHS announced that it was concerned that individuals who elected COBRA coverage may not have been aware of the Exchange enrollment limitation, since the former model COBRA election Notice did not sufficiently address the applicable special enrollment period for COBRA qualified beneficiaries. For this reason, the guidance provides a special enrollment period until July 1, 2014 for individuals eligible for COBRA and COBRA beneficiaries.  The new model Notices now make clear that employees who do not elect Exchange coverage at the time of the COBRA qualifying event will generally have to wait until open enrollment to enroll in Exchange coverage.

4. Covered California. Covered California has issued its own FAQs on COBRA.

·        If you do not elect COBRA, you can elect coverage under Covered California as long as you do so within 60 days of termination of your group coverage.

·        If you currently are on COBRA, you can enroll in Covered California if you do so by July 15, 2014.

·        To review Covered California’s COBRA FAQs, go to www.coveredca.com/faqs/cobra/.

5. Plan Sponsor Options. A plan sponsor can continue to use the current General Notice (last updated on May 18, 2013) or introduce the new model General Notice, as good faith compliance until the Agencies issue final regulations.

Out-of-Pocket Maximums

For plan years beginning in 2014, annual out-of-pocket maximums for non-grandfathered health plans are limited to $6,350 for single coverage and $12,700 for family coverage. The limit applies only to Essential Health Benefits. The rules require that the plan must apply deductibles, co-pays, and co-insurance amounts (e.g. 80%-20%) for Essential Health Benefits toward that maximum out-of-pocket. The plan can choose whether to include expenses in excess of allowance for services/supplies (e.g. reasonable and customary benefits) and non-network/out-of-network increased cost sharing. The summary plan description must contain a full description of what will apply toward the out-of-pocket maximums.

Preventive Services

Non-grandfathered health plans must offer preventive services without cost sharing (in-network only). The Agencies’ FAQs indicate that plan sponsors must include tobacco use counseling and interventions as a preventive service. The FAQs expands on the potential scope of prevention to include:

·        Screening for tobacco use; and,

·        For those who use tobacco products, at least two tobacco cessation attempts per year. For this purpose, covering a cessation attempt includes coverage for:

o   Four tobacco cessation counseling sessions of at least 10 minutes each (including telephone counseling, group counseling, and individual counseling) without prior authorization; and,

o   All Food and Drug Administration (FDA)-approved tobacco cessation medications (including both prescription and over-the-counter medications) for a 90-day treatment regimen when prescribed by a health care provider without prior authorization.

Other Matters

·        FSA Carry Overs. The $2,500 FSA maximum does not include unused carry-over amounts.

  • Summary of Benefits and Coverage. The Agencies have agreed to extend the safe harbors and other enforcement relief beyond the initial two-year period until the such time as the Agencies provide further guidance.