GOVERNMENT SEEKS INPUT ON COBRA GUIDELINES

WASHINGTON-Eleven years after Congress passed the COBRA health care continuation statute, a federal agency is asking if it is time to issue new regulations and guidance on how employers should communicate the benefit to employees.

Last week, the Labor Department issued a request for information to help the agency decide whether it should draft new rules to "explicate" COBRA's numerous notice requirements that kick in when employees are hired, when an event occurs that entitles them to coverage and during the period when they can elect COBRA coverage.

In particular, the Labor Department wants to know if it should revamp a model notice issued shortly after COBRA's enactment in 1986 that employers can use to explain COBRA benefits to newly hired employees.

The department also is requesting comments on whether it should prepare a second model notice that employers could use to explain to employees and spouses their right to obtain COBRA coverage after a qualifying event, such as termination of employment, the death of an employee or a divorce or marital separation.

But some benefit experts question the need for additional Labor Department guidance covering notification to employees of COBRA coverage more than a decade after the enactment of COBRA.

"After 11 years, employers pretty much have their systems in place. Putting out a model notice is helpful just after legislation is passed," said John Piro, a consultant with Hewitt Associates L.L.C. in Rowayton, Conn.

Mr. Piro worries that new model notices could cause needless employer concern over whether their own methods to communicate COBRA coverage information to beneficiaries are correct.

In its call for comments, the Labor Department notes that time has eroded the utility of its original model notice that employers can use to advise new employees of their rights under COBRA. Congress on several occasions has revamped the statute, such as by giving disabled employees who lose their jobs the right to purchase 29 months of COBRA coverage compared to the standard 18 months of coverage other employees can purchase after their employment ceases.

For the initial COBRA notice, the agency is asking for comments on:

What information should be included in the initial notice?

Would model language be helpful?

Is furnishing one initial notice to an employee and spouse residing at the same address adequate?

In addition, the department would like comments on the so-called notice of the qualifying event. Under this part of COBRA, a health care plan administrator must be notified that an event has occurred that entitles employees or dependents to COBRA benefits.

The nature of the event determines whether this notification obligation falls on the beneficiary or employer. For example, if the qualifying event is the divorce of an employee, the covered employee or qualified beneficiary must notify the plan administrator. In the case of the death of an employee, the employer must notify the plan administrator.

For this notice of the qualifying event, the department wants comments on:

Should the department provide a "model" notice of qualifying event for use by beneficiaries and employers?

In what form should this notice be required to be provided?

Should the department provide rules under which notice of a qualifying event is deemed to have occurred when an employer also is the plan administrator?

The department also wants comment on the third COBRA notification requirement. This notice informs qualified beneficiaries that they have the right to elect COBRA coverage and have up to 60 days to decide if they want the coverage.

Questions the department would like answers to regarding this notice on the right to elect continuation coverage include:

Should the department provide a "model" notice of the right to elect continuation coverage?

What information should be required to be included in the notice of the right to elect COBRA?

For example, the department suggests that information that might be included in the notice would be the premiums beneficiaries would be required to pay, how the premiums were calculated, the dates on which payments are due and the consequences of non-payment.

In a related area, the department wants advice on the appropriate means, such as written notices or electronic media, through which COBRA notification requirements can be met. Typically, COBRA notices are sent through first-class mail to beneficiaries' home addresses.

Many employers, says Will Applegate, a senior consultant at The Kwasha Lipton Group in Fort Lee, N.J., would jump at the chance to issue COBRA notices through electronic means, such as e-mail. Mr. Applegate noted that electronic notices could be faster and less expensive than sending notices by mail.

"The world has changed since 1986 in terms of communication vehicles, and the Labor Department is recognizing that," said Henry Saveth, a principal with William M. Mercer Inc. in Washington.

Others, though, wonder how practical e-mail or other electronic media would be as a COBRA notification vehicle.

"This may sound like a wonderful idea, but there are still a lot of employees who lack access to personal computers," said Jerry Lanoux, a principal in the Boston office of Buck Consultants Inc.

Under the Consolidated Omnibus Budget Reconciliation Act, employers must extend health care coverage to former employees and their dependents in certain situations. In the case of the death or divorce of an employee, a spouse and his or her dependents can purchase COBRA coverage for up to 36 months after the qualifying event. If an employee quits or is let go, he or she can purchase COBRA coverage for 18 months. Employers can charge beneficiaries 102% of the group rate for COBRA coverage.

Comments are due on Nov. 24 and should be addressed to the Office of Regulations and Interpretations, Pension and Welfare Benefits Administration, Room N-5669, U.S. Department of Labor, 200 Constitution Ave., N.W., Washington, D.C. 20210. Attention: COBRA RFI.