Initial COBRA Notice
Why Sending The Initial COBRA Notice Is So Critical
A Case Study
"I want to take Michelle off my insurance" was all Widgetco warehouse manager Dave Lutz said in his email to the company's Human Resources department. No reason was given, and as is often the case, no one in H.R. thought to ask.
Turns out, the couple divorced after ten years of marriage. Michelle moved across town. A few months go by and Sally, the H.R. rep at Widgetco, gets a call from the local hospital trying to verify health insurance coverage for Dave's ex-wife. "Her husband cancelled her coverage a few months back", she says. "What about COBRA?" the hospital asks. Sally has no idea the couple divorced, so she didn't offer coninuation coverage when Michelle was taken off the plan.
End of story? Hardly.
You see, like many employers, Widgetco is pretty good at sending COBRA qualifying event notices (the notice that's sent following a termination of employment), but not so great at sending the Initial, or General COBRA Notice. That's the one that's supposed to be sent to newly covered employees, spouses and dependents within 90 days of becoming covered.
If Widgetco had sent the Initial COBRA Notice, Dave and Michelle would have known it was their responsibility to notify the plan of a divorce and address change. If they had told Sally about the divorce, Sally would surely have offered COBRA to Michelle. But none of that happened. Dave and Michelle were completely unaware of their responsibilities and now Sally is taking a call from a hospital that is going to figure out how to get this woman who was just admitted to I.C.U covered. And you know what? That's exactly what happened. It took about two minutes for the hospital to figure out Widgetco messed up. It also took about two minutes for the insurance carrier to refuse to reinstate coverage for Michelle, leaving Widgetco on the hook for the whole mess.
Summary: If you haven't already, send Initial COBRA Notices to every active employee, spouse and dependent.
The Initial COBRA Notice protects both the employee and employer. If Widgetco had provided the Initial Notice to Dave and Michelle, their failure to notify the plan of their divorce would have been their problem, not Widgetco's.
Remember, employers are required to provide an Initial Notice of COBRA rights (sometimes called the General or New Hire Notice) within 90 days of the date the employee, spouse and dependents become covered under the group health plan(s).
Even though many insurance carriers include the Initial Notice in the Certificates of Coverage and Benefit Booklet, the employer is ultimately responsible for providing this notice to covered employees, spouses and dependents.
IMPORTANT PLANNING POINT: Hand delivery to the employee does not constitute delivery to the spouse. So, if the initial notice is included in plan documents that are hand delivered to an employee, a separate notice must be sent to the covered spouse. For this reason, it is recommended that all employers send the Initial Notice via first class mail addressed to the covered employee and spouse. This insures a consistent method of notice delivery.
One more tip. Keep proof the notice was sent.
If you want to read the text from the 2004 Final COBRA regulations, scroll to the bottom of this page.
(a) General. Pursuant to section 606(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (the Act), the administrator of a group health plan subject to the continuation coverage requirements of part 6 of title I of the Act shall provide, in accordance with this section, written notice to each covered employee and spouse of the covered employee (if any)of the right to continuation coverage provided under the plan. (b) Timing of notice. (1) The notice required by paragraph (a) of this section shall be furnished to each employee and each employee’s spouse, not later than the earlier of:
(i) The date that is 90 days after the date on which such individual’s coverage under the plan commences, or, if later, the date that is 90 days after the date on which the plan first becomes subject to the continuation coverage requirements; or
(ii) The first date on which the administrator is required, pursuant to § 2590.606–4(b), to furnish the covered employee, spouse, or dependent child of such employee notice of a qualified beneficiary’s right to elect continuation coverage.
(2) A notice that is furnished in accordance with paragraph (b)(1) of this section shall, for purposes of section 606(a)(1) of the Act, be deemed to be provided at the time of commencement of coverage under the plan. (3) In any case in which an
administrator is required to furnish a notice to a covered employee or spouse pursuant to paragraph (b)(1)(ii) of this
section, the furnishing of a notice to such individual in accordance with § 2590.606–4(b) shall be deemed to satisfy the requirements of this section.
(c) Content of notice. The notice required by paragraph (a) of this section shall be written in a manner calculated
to be understood by the average plan participant and shall contain the following information:
(1) The name of the plan under which continuation coverage is available, and the name, address and telephone number of a party or parties from whom additional information about the plan and continuation coverage can be obtained; (2) A general description of the continuation coverage under the plan, including identification of the classes of individuals who may become qualified beneficiaries, the types of qualifying events that may give rise to the right to continuation coverage, the obligation of the employer to notify the plan administrator of the occurrence of certain qualifying events, the maximum
period for which continuation coverage may be available, when and under what circumstances continuation coverage
may be extended beyond the applicable maximum period, and the plan’s requirements applicable to the payment
of premiums for continuation coverage;
(3) An explanation of the plan’s requirements regarding the responsibility of a qualified beneficiary to notify the administrator of a qualifying event that is a divorce, legal separation, or a child’s ceasing to be a dependent under the terms of the plan,
and a description of the plan’s procedures for providing such notice;
(4) An explanation of the plan’s requirements regarding the responsibility of qualified beneficiaries who are receiving continuation coverage to provide notice to the administrator of a determination by the Social Security Administration, under title II or XVI of the Social Security Act (42 U.S.C. 401 et seq. or 1381 et seq.), that a qualified beneficiary is disabled, and a
description of the plan’s procedures for providing such notice;
(5) An explanation of the importance of keeping the administrator informed of the current addresses of all participants or beneficiaries under the plan who are or may become qualified beneficiaries; and
(6) A statement that the notice does not fully describe continuation coverage or other rights under the plan and that more complete information regarding such rights is available from the plan administrator and in the plan’s SPD. (d) Single notice rule. A plan administrator may satisfy the requirement to provide notice in accordance with this section to a covered employee and the covered employee’s spouse by furnishing a single notice addressed to both the covered employee and the covered employee’s spouse, if, on the basis of the most recent information available to the plan, the covered employee’s spouse resides at the same location as the covered employee, and the spouse’s coverage under the plan commences on or after the date on which the covered employee’s coverage commences, but not later than the date on which the notice required by this section is required to be provided to the covered employee. Nothing in this section shall
be construed to create a requirement to provide a separate notice to dependent children who share a residence with a
covered employer or a covered employee’s spouse to whom notice is provided in accordance with this section.