United States: Cobra Alert
Notice Updates Required

The United States Department of Labor ("DOL") has just issued proposed regulations that immediately change the notice requirements under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). First, effective May 28, 2003, group health plan sponsors may no longer use the model general COBRA notice that was first issued in 1986 if it has not been updated to reflect recent statutory and regulatory changes. Instead, group health plan sponsors may use the new general COBRA notice (with appropriate modifications to the extent necessary and allowable) that is contained in the proposed regulations. Second, information regarding the new 65% tax credit for payment of qualified health insurance premiums by trade-displaced workers should now be included in group health plan summary plan descriptions ("SPD") in the discussion of COBRA rights and responsibilities.

The remaining requirements of the proposed regulations will be effective for plan years beginning in 2004. For example, beginning in 2004, the general COBRA notice must be provided to new employees within 90 days after health care coverage begins. Including the notice in a health plan’s SPD will satisfy this requirement, provided the employer issues the SPD within that 90-day period.

In addition, group health plans will be required to establish "reasonable procedures" for qualified beneficiaries to notify plan administrators of qualifying events. Also, COBRA election notices will have to include 15 new provisions, including a description of the consequences of failing to elect or exhaust COBRA coverage under HIPAA’s portability rules and any conversion options available to qualified beneficiaries upon the exhaustion of COBRA coverage.

Finally, the proposed regulations introduce two new required notices. First, the new "notice of termination of COBRA coverage" notifies qualified beneficiaries of a premature termination of COBRA coverage. Second, the new "notice of unavailability of COBRA coverage" notifies individuals that they are not entitled to COBRA after a qualifying event.