The US Department of Labor (DOL) recently issued guidance and updated model Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) continuation coverage notices. The new guidance supersedes prior guidance and model notices. The DOL considers the use of the updated model notices available on its website to constitute good faith compliance with detailed notice content requirements of COBRA. This is particularly important in light of a recent increase in class actions against plan sponsors alleging deficiencies in COBRA notices. The model general notice and model election notice are available in modifiable, electronic form on the DOL’s website.

Overview

The DOL requires each employer that offers group health coverage and that employed an average of at least 20 full-time equivalent employees in the prior year to disclose information regarding COBRA continuation coverage. The general COBRA notice must be provided to the employee and spouse and dependents (if any) when group health plan coverage starts (a single notice addressed to the employee “and family” and sent to the employee’s last known address is sufficient). The COBRA election notice must be provided to individuals who are eligible for COBRA coverage due to a qualifying event, such as termination of employment or reduction of hours, divorce or legal separation, Medicare entitlement, or loss of dependent status. Individuals with such a right are referred to as qualified beneficiaries. The notices inform participants and beneficiaries of their rights under COBRA and qualified beneficiaries of their right to elect COBRA.

Key Aspects of the Updated Model COBRA Notices

The updated model notices explain how COBRA and Medicare interact and why enrolling in Medicare might be a better option for some. This is helpful for employers as well, as plan claims and costs are generally lower when Medicare-eligible individuals elect Medicare rather than COBRA. The following information is included in the updated model notices:

• All coverage options are listed: Health Insurance Marketplace, Medicare, Medicaid, Children’s Health Insurance Program (CHIP), or other group health plan coverage. These options may cost less than COBRA continuation coverage.

• Employees who did not initially enroll in Medicare because they were still employed have eight months to do so starting the month after the end of their employment or their group health coverage. This is called a special Medicare enrollment period.

• If COBRA is elected instead of Medicare, there may be a late enrollment penalty or a gap in coverage if Medicare Part B is elected later.

• If a recipient chooses to enroll in Medicare after COBRA has been elected, the plan may terminate their COBRA continuation coverage. 

• If Medicare Part A or B is effective before the COBRA election, COBRA coverage may not be discontinued on account of Medicare entitlement, even if the other part of Medicare becomes effective after the election of COBRA coverage.

• If an individual is enrolled in Medicare and COBRA, Medicare will usually pay first. Some plans provide that they are secondary to Medicare even if the COBRA participant is not enrolled in Medicare. 

Medicare Part A and Part B Enrollment Periods

• Medicare Part A can be elected any time after age 65. Medicare Part A, also known as hospital insurance, helps cover inpatient care in hospitals and skilled nursing facilities (not custodial or long-term care). It also covers hospice care, home health care and inpatient care in a religious nonmedical health care institution. This coverage is free if the employee or his or her spouse paid Medicare taxes while working for a certain period of time.

• Individuals may apply for Medicare Part B during either a Special Enrollment Period or General Enrollment Period. Medicare Part B, also known as medical insurance, helps cover medically necessary doctors’ services, outpatient care, durable medical equipment, mental health services, and other medical services that Medicare Part A doesn’t cover, such as some of the services of physical and occupational therapists, and some home health care. This coverage requires a monthly premium.

  • The Initial Enrollment Period for Part A and/or Part B is a seven-month period that begins three months before the month the individual attains age 65, includes the month of the 65^th birthday, and ends three months later. Some people get Medicare Part A and Part B automatically.

  • The Medicare Part B Special Enrollment Period will be available when an individual is in a group health plan by reason of the individual’s current employment status, and for the eight months following the month the coverage ends or when the employment ends (whichever is first). The special enrollment period after termination of employment is not extended by the COBRA coverage period, because coverage during the COBRA period is not treated the same as coverage during active employment.

  • The General Enrollment Period for Medicare Part B is January 1 through March 31 of each year. The coverage doesn’t begin until July 1 of that year and the premium may be higher for late enrollment. 

To avoid paying a higher premium, an individual must sign up for Medicare during the Initial Enrollment Period or, if eligible, during the Special Enrollment Period. The 2020 standard Medicare Part B premium is $144.60 per month. The premium will go up 10% for each full 12-month period that an individual does not enroll in Part B after first becoming eligible (but excluding any period during which the individual had employer coverage, and excluding the eight-month Special Enrollment Period). 

There are a number of online government publications that address Medicare and COBRA issues for those over 65. One publication that describes the Medicare coverage, enrollment periods, and premiums is the Medicare & You National Handbook, available at medicare.gov. This publication is updated each year. For general Medicare questions, employers and employees can visit medicare.gov or call 1-800-MEDICARE.