EBSA Proposed Rules

Health Care Continuation Coverage   [5/7/2014]
[PDF]
Federal Register, Volume 79 Issue 88 (Wednesday, May 7, 2014)
[Federal Register Volume 79, Number 88 (Wednesday, May 7, 2014)]
[Proposed Rules]
[Pages 26192-26195]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10416]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AB65


Health Care Continuation Coverage

AGENCIES: Employee Benefits Security Administration, Department of 
Labor.

ACTION: Proposed rules.

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SUMMARY: These proposed regulations contain amendments to notice 
requirements of the health care continuation coverage (COBRA) 
provisions of Part 6 of title I of the Employee Retirement Income 
Security Act of 1974 (ERISA) to better align the provision of guidance 
under the COBRA notice requirements with the Affordable Care Act 
provisions already in effect, as well as any provisions of federal law 
that will become applicable in the future.

DATES: Written comments on this notice of proposed rulemaking are 
invited and must be received by July 7, 2014.

ADDRESSES: Written comments may be submitted to the Department of Labor 
as specified below. Any comment that is submitted will be shared with 
the other Departments and will also be made available to the public. 
Warning: Do not include any personally identifiable information (such 
as name, address, or other contact information) or confidential 
business information that you do not want publicly disclosed. All 
comments may be posted on the Internet and can be retrieved by most 
Internet search engines. No deletions, modifications, or redactions 
will be made to the comments received, as they are public records. 
Comments may be submitted anonymously.
    Comments, identified by ``Health Care Continuation Coverage,'' may 
be submitted by one of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    Mail or Hand Delivery: Office of Health Plan Standards and 
Compliance Assistance, Employee Benefits Security Administration, Room 
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210, Attention: Health Care Continuation Coverage.
    Comments received will be posted without change to 
www.regulations.gov and available for public inspection at the Public 
Disclosure Room, N-1513, Employee Benefits Security Administration, 200 
Constitution Avenue NW., Washington, DC 20210, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT: Amy Turner or Elizabeth Schumacher, 
Employee Benefits Security Administration, Department of Labor.
    Customer service information: Individuals interested in obtaining 
information from the Department of Labor concerning employment-based 
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (www.dol.gov/ebsa).

SUPPLEMENTARY INFORMATION:

I. Background

    The continuation coverage provisions, sections 601 through 608 of 
title I of the Employee Retirement Income Security Act (ERISA), were 
enacted as part of the Consolidated Omnibus Budget Reconciliation Act 
of 1985 (COBRA), which also promulgated parallel provisions of the 
Internal Revenue Code (the Code) and the Public Health Service Act (the 
PHS Act).\1\ These provisions are commonly referred to as the COBRA 
provisions, and the continuation coverage that they mandate is commonly 
referred to as COBRA coverage. COBRA, as enacted, provides that the 
Secretary of Labor (the Secretary) has the authority under section 608 
to carry out the provisions of part 6 of title I of ERISA. The 
Conference Report that accompanied COBRA divided interpretive authority 
over the COBRA provisions between the Secretary and the Secretary of 
the Treasury (the Treasury) by providing that the Secretary has the 
authority to issue regulations implementing the notice and disclosure 
requirements of COBRA, while the Treasury is authorized to issue 
regulations defining the required continuation coverage.\2\
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    \1\ The Code and PHS Act COBRA provisions, although very similar 
in other ways, are not identical to the COBRA provisions in title I 
of ERISA in their scope of application. The PHS Act provisions apply 
only to State and local governmental plans, and the Code provisions 
grant COBRA rights to individuals who would not be considered 
participants or beneficiaries under ERISA. See PHS Act, 42 U.S.C. 
300bb-8; Code section 5000(b)(1).
    \2\ H.R. Conf. Rep. No. 99-453, 99th Cong., 1st Sess., at 562-63 
(1985). The Conference Report further indicates that the Secretary 
of Health and Human Services, who is to issue regulations 
implementing the continuation coverage requirements for State and 
local governments, must conform the actual requirements of those 
regulations to the regulations issued by the Secretary and the 
Treasury. Id. at 563.
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    On May 26, 2004, the Department of Labor (Department) issued final 
regulations implementing various provisions of the COBRA notice 
requirements and model notices to facilitate compliance with the 
requirement to provide the general notice of continuation coverage 
(general notice) as well as COBRA continuation election notice 
(election notice).\3\ The model general notice was issued in an 
appendix to Sec.  2590.606-1 and the model election notice was issued 
in an appendix to Sec.  2590.606-4.
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    \3\ 69 FR 30084 (May, 26, 2004).
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    In general, under COBRA, group health plans must provide a written 
notice of COBRA rights to each covered employee and spouse (if any) 
``at the time of commencement of coverage'' under the plan. Generally, 
the notice must be furnished to each covered employee and to the 
employee's spouse (if covered under the plan) not later than the 
earlier of: (1) Either 90 days from the date on which the covered 
employee or spouse first becomes covered under the plan or, if later, 
the date on which the plan first becomes subject to the continuation 
coverage requirements; or (2) the date on which

[[Page 26193]]

the administrator is required to furnish an election notice to the 
employee or to his or her spouse or dependent.\4\
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    \4\ See 29 CFR 2590.606-1.
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    In addition to the general notice, group health plans must provide 
an election notice at the time of certain qualifying events.\5\ In 
general, an individual who was covered by a group health plan on the 
day before a qualifying event occurred may be able to elect COBRA 
continuation coverage upon a qualifying event (such as termination of 
employment or reduction in hours that causes loss of coverage under the 
plan).\6\ Individuals with such a right are called qualified 
beneficiaries. A group health plan must provide qualified beneficiaries 
with an election notice, which describes their rights to continuation 
coverage and how to make an election. The election notice must be 
provided to the qualified beneficiaries within 14 days after the plan 
administrator receives the notice of a qualifying event.
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    \5\ See 29 CFR 2590.606-4.
    \6\ For more information on COBRA continuation coverage 
requirements applicable to group health plans, see ``An Employer's 
Guide to Group Health Continuation Coverage Under COBRA,'' available 
at www.dol.gov/ebsa/publications/cobraemployer.html.
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    On May 8, 2013, the Department issued Technical Release 2013-02 and 
an updated model election notice with additional information regarding 
health coverage options that will be available beginning January 1, 
2014 under the Patient Protection and Affordable Care Act (Affordable 
Care Act).\7\ The guidance highlighted that some qualified 
beneficiaries may want to consider and compare health coverage 
alternatives to COBRA continuation coverage that are available through 
a new competitive private health insurance market--the Health Insurance 
Marketplace (Marketplace). The Department also noted that some 
qualified beneficiaries may also be eligible for a premium tax credit 
(a tax credit to help pay for some or all of the cost of coverage in 
plans offered through the Marketplace).
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    \7\ See Technical Release 2013-02 available at http://www.dol.gov/ebsa/newsroom/tr13-02.html.
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    These proposed regulations amend paragraph (g) of Sec.  2590.606-1 
and paragraph (g) of Sec.  2590.606-4 and delete the two appendices 
containing the model notices to better facilitate provision of updated 
model election notices and solicit comment before promulgation of final 
regulations.

II. Overview of the Proposed Regulations

    These proposed regulations contain amendments to notice 
requirements of the COBRA provisions of Part 6 of title I of ERISA to 
better align the provision of guidance under the COBRA notice 
requirements with the Affordable Care Act provisions already in effect, 
as well as provide valuable flexibility to respond to provisions of 
federal law that will become applicable in the future. The proposed 
amendment will eliminate the current version of the model general 
notice contained in the appendix of Sec.  2590.606-1 and the model 
election notice contained in the appendix of Sec.  2590.606-4 as these 
model notices are outdated. Additionally, these proposed regulations 
make technical changes to the instruction language pointing to the 
model notices in the appendices in paragraph (g) of Sec.  2590.606-1 
and paragraph (g) of Sec.  2590.606-4. These changes will permit the 
Department to amend the model notices as necessary and provide the most 
current versions of the model notices on the Department's Web site. 
These changes will also eliminate confusion that may result from 
multiple versions of the model notices being available in different 
locations. Contemporaneous with issuance of these proposed regulations, 
the Department is also issuing updated versions of the model general 
notice and model election notice, as well as guidance announcing the 
availability of such updated notices. These updated notices reflect 
that coverage is now available in the Marketplace and the updated model 
election notice provides information on special enrollment rights in 
the Marketplace. The Department invites comment on ways to improve or 
streamline the model notices, whether the Department's provision of new 
model notices is sufficient and, if not, whether the Department should 
expand the underlying content requirements or require use of mandatory 
language.
    The updated model notices are available in modifiable, electronic 
form on the Department's Web site at www.dol.gov/ebsa/cobra.html. As 
with the earlier models, in order to use these model notices properly, 
the plan administrator must complete them by filling in the blanks with 
the appropriate plan information. Until rulemaking is finalized and 
effective, the Department of Labor will consider use of the model 
notices available on its Web site, appropriately completed, to be good 
faith compliance with the notice content requirements of COBRA. The 
Department notes that the use of the model notices is not required. The 
model notices are provided solely for the purpose of facilitating 
compliance with the applicable notice requirements.

III. Economic Impact and Paperwork Burden

A. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing and streamlining rules, and 
of promoting flexibility.
    Under Executive Order 12866, ``significant'' regulatory actions are 
subject to the requirements of the executive order and review by the 
Office of Management and Budget (OMB). Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action'' as an action that is 
likely to result in a rule (1) having an annual effect on the economy 
of $100 million or more, or adversely and materially affecting a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local or tribal governments or 
communities (also referred to as ``economically significant''); (2) 
creating serious inconsistency or otherwise interfering with an action 
taken or planned by another agency; (3) materially altering the 
budgetary impacts of entitlement grants, user fees, or loan programs or 
the rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order. 
Pursuant to the terms of the Executive Order, OMB has determined that 
this action is not ``significant'' within the meaning of section 3(f) 
of the Executive Order. Therefore, the proposed rule was reviewed by 
OMB. However, because the rule merely removes the model notices from 
the CFR and the model notices themselves remain voluntary, the 
Department does not expect this rulemaking to result in significant 
costs or benefits.

B. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the APA (5 
U.S.C. 551 et seq.) and are likely to have a significant economic 
impact on a substantial number of small entities.

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Unless an agency certifies that such a rule will not have a significant 
economic impact on a substantial number of small entities, section 603 
of the RFA requires the agency to present an initial regulatory 
flexibility analysis at the time of the publication of the rulemaking 
describing the impact of the rule on small entities. Small entities 
include small businesses, organizations and governmental jurisdictions.
    As discussed above, the proposed rule would amend the 2004 final 
regulation by deleting references to the model notices and two 
appendices containing the model notices to better facilitate provision 
of updated model election notices and solicit comment before 
promulgation of final regulations. The proposed rule does not make any 
material changes to the notices. Therefore, the Department hereby 
certifies that the proposed rule is not likely to have a significant 
economic impact on a substantial number of small entities. The 
Department welcomes public comments regarding its certification.

C. Paperwork Reduction Act

    The Office of Management and Budget approved the COBRA model notice 
information collection request under OMB Control Number 1210-0123, 
which is scheduled to expire on October 31, 2016. As discussed above, 
the proposed rule would amend the 2004 final regulation by deleting 
references to the model notices and two appendices containing the model 
notices to better facilitate provision of updated model election 
notices and solicit comment before promulgation of final regulations. 
The Department does not believe that these minor modifications 
implement any substantive or material change to the information 
collection; therefore, no further review is requested of OMB at this 
time. The Department solicits comment on this understanding.

D. Congressional Review Act

    This proposed rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and, if finalized, will be transmitted to 
Congress and the Comptroller General for review.

E. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, this proposed rule does not 
include any Federal mandate that may result in expenditures by State, 
local, or tribal governments in the aggregate of more than $100 
million, adjusted for inflation, or increase expenditures by the 
private sector of more than $100 million, adjusted for inflation.

F. Federalism Statement

    Executive Order 13132 (Aug. 4, 1999) outlines fundamental 
principles of federalism and requires the adherence to specific 
criteria by Federal agencies in the process of their formulation and 
implementation of policies that have substantial direct effects on the 
States, the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. This proposed rule does not have 
federalism implications because it has no substantial direct effect on 
the States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Section 514 of ERISA provides, with 
certain exceptions specifically enumerated, that the provisions of 
titles I and IV of ERISA supersede any and all laws of the States as 
they relate to any employee benefit plan covered under ERISA. The 
requirements implemented in this rule do not alter the fundamental 
provisions of the statute with respect to employee benefit plans, and 
as such would have no implications for the States or the relationship 
or distribution of power between the national government and the 
States.

IV. Statutory Authority

    The Department of Labor regulations are adopted pursuant to the 
authority contained in 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 
1181-1183, 1181 note, 1185, 1185a, 1185b, 1185c, 1185d, 1191, 1191a, 
1191b, and 1191c; sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 
401(b), Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 
512(d), Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), 
Pub. L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 
Stat. 1029; Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9, 
2012).

List of Subjects in 29 CFR Part 2590

    Continuation coverage, Disclosure, Employee benefit plans, Group 
health plans, Health care, Health insurance, Medical child support, 
Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, the Department of Labor 
proposes to amend 29 CFR part 2590 as follows:

PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS

0
1. The authority citation for part 2590 continues to read as follows:

    Authority:  29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1185c, 1185d, 1191, 1191a, 
1191b, and 1191c; sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 
401(b), Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 
512(d), Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 
1562(e), Pub. L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-
152, 124 Stat. 1029; Secretary of Labor's Order 1-2011, 77 FR 1088 
(January 9, 2012).

0
2. Section 2590.606-1 is amended by removing the appendix to the 
section, and revising paragraph (g) to read as follows:


Sec.  2590.606-1  General notice of continuation coverage.

* * * * *
    (g) Model notice. The requirements of paragraph (c) of this section 
are satisfied with respect to a single-employer group health plan if 
the plan provides a notice in accordance with the model certificate 
authorized by the Secretary, appropriately modified and supplemented as 
necessary, consistent with guidance issued by the Secretary. Use of the 
model notice is not mandatory. The model notice reflects the 
requirements of this section as they would apply to single-employer 
group health plans and must be modified if used to provide notice with 
respect to other types of group health plans, such as multiemployer 
plans or plans established and maintained by employee organizations for 
their members. In order to use the model notice, administrators must 
appropriately add relevant information where indicated in the model 
notice, select among alternative language, and supplement the model 
notice to reflect applicable plan provisions. Items of information that 
are not applicable to a particular plan may be deleted. Use of the 
model notice, appropriately modified and supplemented, will be deemed 
to satisfy the notice content requirements of paragraph (c) of this 
section.
* * * * *
0
3. Section 2590.606-4 is amended by removing the appendix to the 
section, and revising paragraph (g) to read as follows:


Sec.  2590.606-4  Notice requirements for plan administrators.

* * * * *
    (g) Model notice. The requirements of paragraph (b)(4) of this 
section are satisfied with respect to a plan

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administrator if the plan provides a notice in accordance with the 
model certificate authorized by the Secretary, appropriately modified 
and supplemented as necessary, consistent with guidance issued by the 
Secretary. Use of the model notice is not mandatory. The model notice 
reflects the requirements of this section as they would apply to 
single-employer group health plans and must be modified if used to 
provide notice with respect to other types of group health plans, such 
as multiemployer plans or plans established and maintained by employee 
organizations for their members. In order to use the model notice, 
administrators must appropriately add relevant information where 
indicated in the model notice, select among alternative language, and 
supplement the model notice to reflect applicable plan provisions. 
Items of information that are not applicable to a particular plan may 
be deleted. Use of the model notice, appropriately modified and 
supplemented, will be deemed to satisfy the notice content requirements 
of paragraph (b)(4) of this section.
* * * * *

    Signed this 1st day of May, 2014.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. 2014-10416 Filed 5-2-14; 11:15 am]
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