When an employer’s staff size reaches 20 or more, it’s generally required to offer “COBRA” health care coverage to departing employees. (The name comes from the legislation that made it law: the Consolidated Omnibus Budget Reconciliation Act of 1985.)
If your organization is subject to COBRA, you may wonder whether you must provide the initial coverage notices every year. The short answer is “no.” But, for practical reasons, some plans choose to distribute initial COBRA notices annually, anyway.
A group health plan subject to COBRA is required to provide an initial (or “general”) COBRA notice to a covered employee or covered spouse only once — within 90 days after the individual first becomes covered under the plan. There’s no requirement to provide an initial notice to dependent children.
Remember, though, that employees or spouses can become covered at different times throughout the year, such as when a covered employee marries and adds a spouse to the plan midyear or when an employee is hired midyear. So, the 90-day initial notice deadline may fall at different times for different employees and spouses. An initial notice must also be provided if there is a significant change in the group health plan or if an employee or spouse adds coverage under a new plan or changes coverage to a different plan maintained by the employer.
Because these circumstances are unpredictable, some plans find it easier to ensure adequate distribution by sending annual initial notices to all covered employees and spouses — even those who have received them before.
In addition, there are exceptions to the general rule that the deadline for distributing the initial notice is 90 days after commencement of plan coverage. For instance, if a plan must furnish a COBRA election notice to a qualified beneficiary within 90 days after coverage begins — that is, a COBRA qualifying event occurs, and the qualified beneficiary is entitled to elect COBRA before the initial notice is given — then the time for providing the initial notice is accelerated to coincide with the deadline for providing the election notice.
In this case, furnishing the required election notice will satisfy the initial notice requirement for the individuals to whom the election notice is provided. But if an election notice isn’t required to be provided to all family members — for example, an election notice might be required only for a dependent child who has lost eligibility under the plan — then the covered employee or spouse who’s not entitled to receive an election notice must still be furnished an initial notice by the accelerated initial notice deadline.
Nuances and technicalities
The COBRA rules include many nuances and technicalities that are easy for an employer to overlook. Contact us for assistance in monitoring and managing the financial risks of offering health care benefits.