COBRA Compliance - Required COBRA Notices and Deadlines

The Consolidated Omnibus Budget Reconciliation Act 1985 (COBRA) requires plan administrators to provide certain disclosures to plan participants, other covered dependents, and those who lose their health plan coverage and attain the status of qualified beneficiaries. Failing to meet COBRA requirements can result in significant consequences for the employer who is the Plan Sponsor, including penalties as well as potential liability to pay extensive medical bills if COBRA enrollment opportunities are missed. 

One of the best ways an employer can ensure they are managing group health plan requirements appropriately and mitigating unnecessary risk and expenses is to know their notice responsibilities and to make sure they are met. 

There are four major COBRA notices that plan administrators must deliver correctly in order to maintain COBRA compliance: 

COBRA General Notice

The COBRA General Notice, also known as the Initial Notice should be provided to the covered employee (and their spouse, if applicable) when they first become covered under the group health plan. The regulations provide up to 90 days to deliver the COBRA General Notice. 
The COBRA General Notice will provide basic COBRA information, including a summary of COBRA rights and obligations, information on when COBRA is available and how long coverage will potentially last. 

The Department of Labor (DOL) has issued a model COBRA General Notice to assist plan administrators in meeting this requirement. Employers are not required to utilize the DOL’s model notice, but the Department has indicated that use of the model notice would demonstrate a good faith effort at meeting the compliance requirements. 

There is no requirement to deliver the COBRA General Notice separately from other communications, and a plan administrator may sometimes utilize the Summary Plan Description (SPD) for the plan to communicate this information. However, care must be taken when utilizing this approach to ensure that spouses of participants also receive the information in the COBRA General Notice, because they are not required to receive a copy of the SPD. 
If a plan fails to provide the COBRA General Notice within 90 days of the individual first being covered there is no specific penalty assessed for that failure, but there is a significant consequence for the plan, in that the plan administrator is unable to impose notice deadlines on the individual until they actually deliver the COBRA General Notice. Delaying the COBRA General  Notice could delay the Election Notice.  Note, there is a statutory penalty of up to $110 per day that may apply if a plan administrator fails to provide an Election Notice. 


COBRA Election Notice 
The COBRA Election Notice must be provided within 44 days of the qualified beneficiary experiencing a qualifying event (when the employer is also acting as the plan administrator, which is generally the case). 

The COBRA Election Notice must be provided to all qualified beneficiaries, however, if a qualifying event results in the employee, spouse and dependents all becoming eligible for COBRA then one notice can be considered sufficient for all, as long as they all live at the same address. 
The DOL has also issued a model COBRA Election Notice to assist plan administrators in meeting this requirement. As with the COBRA General Notice, employers are not required to utilize the DOL’s model notice, but the DOL has indicated that use of the model notice would demonstrate a good faith effort at meeting the compliance requirements associated with communicating election information. 

Plan administrators must monitor this aspect of plan administration carefully, as late notice delivery can extend a qualified beneficiary’s 60-day election period.  This can cause substantial risk to the plan, as insurers may not cover the costs for expenses when the COBRA election is made outside of the normal deadlines. This can also create a significant liability for the plan sponsor as they may be required to cover medical costs. Additionally, the statutory penalty of up to $110 per day may apply if a plan administrator fails to provide a COBRA Election Notice within the legal timeframe. 

COBRA Notice of Unavailability
If the plan administrator determines that an individual is not entitled to COBRA, they must send the individual a notice with explanation. The letter must explain the reason(s) as to why the determination was made, as well as an explanation as to how the decision can be appealed. 

The DOL does not have a model Notice of Unavailability.  As such, a plan must provide a communication that contains the required information in a way that is readily understandable to the average individual. If there are multiple individuals who will not be entitled to coverage who reside at the same address, delivering one notice to the address will be sufficient to meet the requirement for all. 

This notice must be provided within 14 days of the date the plan administrator was notified of a qualifying event. Although there are no specific statutory penalties for noncompliance, failing to provide the Notice of Unavailability may increase risk to the plan administrator for medical claims. 

COBRA Notice of Early Termination
In general, COBRA coverage runs for 18 months (or 29 or 36 months in special circumstances).  If the coverage ends early, the plan must send a notice indicating (i) the reason for the early termination of the coverage along with information on how to enroll in Marketplace coverage if necessary; or (ii) how to request a review of the decision if they believe it has been reached in error. 

The potential reasons for early termination that may trigger the requirement to send this notice are:
  • the premium was not paid on time,
  • the employer stopped offering group coverage to employees,
  • the individual began receiving coverage under another plan or Medicare, or 
  • if they were on a disability extension it has been determined that they are no longer disabled.
As there is no model Notice of Early Termination, a plan must provide a communication that contains the required information in a way that is readily understandable to the average individual. If there are multiple individuals who will not be entitled to coverage who reside at the same address, delivering one notice to the address will be sufficient to meet the requirement for all. While there is no specific deadline, once an event that triggers early termination is determined to have occurred then notice should be delivered as soon as possible. 
 
There are no specific statutory penalties that would be applied for failing to provide this notice, however, the plan may have potential liability for medical claims when COBRA was not terminated or communication of COBRA was not communicated properly. 
 
As a service Chard Snyder offers the Initial Notice as well as the Election Notice and Notice of Early Termination as a standard. Please contact your account representative if you are interested in learning more about our COBRA administration services.