[Federal Register Volume 61, Number 212 (Thursday, October 31, 1996)]
[Notices]
[Pages 56239-56240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27964]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Requirements for Group Health Plans for Certain State and Local 
Government Employees--COBRA Continuation Coverage

AGENCY: Office of the Secretary, HHS.

ACTION: Notice.

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SUMMARY: This notice contains information about the recently enacted 
amendments to Title XXII of the Public Health Service (PHS) Act. Title 
XXII requires that certain State and local government employers provide 
certain individuals and their family members the opportunity to 
continue health care coverage under a group health plan in certain 
instances where coverage under the plan would otherwise be terminated. 
Under the amendments, the group health plans maintained by these 
employers are required to provide to employees who have elected 
continuation coverage notice of the changes to the statute by November 
1, 1996.

DATES: Section 421 of Public Law 104-191, ``COBRA Clarifications,'' 
enacted amendments which will become effective on January 1, 1997, 
regardless of when the qualifying event (the event that leads to 
eligibility for COBRA continuation coverage) occurred.
    See section 421(d), ``Effective Date.'' Also, section 421(e), 
``Notification of Changes,'' requires that, no later than November 1, 
1996, each group health plan covered under Title XXII of the PHS Act 
shall notify each qualified beneficiary who has elected continuation 
coverage of the amendments made by this section.

FOR FURTHER INFORMATION CONTACT: David Benor, Senior Attorney, Office 
of the General Counsel, Room 4A-53, 5600 Fishers Lane, Rockville, MD 
20857. Telephone: (301) 443-2006.

[[Page 56240]]

SUPPLEMENTARY INFORMATION: On August 21, 1996, the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) was signed into 
law (Pub. L. 104-191). Section 421 of HIPAA makes changes, 
described below, to three areas in the continuation coverage rules 
applicable to group health plans under the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (COBRA), as amended. These three 
areas relate to the disability extension, the definition of 
qualified beneficiary and the duration of COBRA continuation 
coverage. These changes are effective beginning January 1, 1997, 
regardless of when the event occurs that entitles an individual to 
COBRA continuation coverage.

    Section 421(e) of HIPAA requires group health plans that are 
subject to COBRA to notify, by November 1, 1996, individuals who have 
elected COBRA continuation coverage of these changes. The Department is 
issuing this notice to apprise State and local government employers and 
plan administrators of the changes in the continuation coverage rules 
made by HIPAA and to inform them of their obligation under HIPAA to 
notify qualified beneficiaries of such changes. Such notification must 
be given by November 1, 1996, to each qualified beneficiary who has 
elected continuation coverage. The following is a discussion of the 
specific changes in the continuation coverage rules made by HIPAA.

Disability Extension

    Under current law, if an individual is entitled to COBRA 
continuation coverage because of a termination of employment or 
reduction in hours of employment, the plan generally is only required 
to make COBRA continuation coverage available to that individual for 18 
months. However, if the individual entitled to the COBRA continuation 
coverage is disabled (as determined under the Social Security Act) and 
satisfies the applicable notice requirements, the plan must provide 
COBRA continuation coverage for 29 months, rather than 18 months. Under 
current law, the individual must be disabled at the time of the 
termination of employment or reduction in hours of employment. HIPAA 
makes changes to the current law to provide that, beginning January 1, 
1997, the disability extension will also apply if the individual 
becomes disabled at any time during the first 60 days of COBRA 
continuation coverage. HIPAA also makes it clear that, if the 
individual entitled to the disability extension has non-disabled family 
members who are entitled to COBRA continuation coverage, those non-
disabled family members are also entitled to the 29 month extended 
period of coverage.

Definition of Qualified Beneficiary

    Individuals entitled to COBRA continuation coverage are called 
qualified beneficiaries. Individuals who may be qualified beneficiaries 
are the spouse and dependent children of a covered employee and, in 
certain cases, the covered employee. Under current law, in order to be 
a qualified beneficiary an individual must generally be covered under a 
group health plan on the day before the event that causes a loss of 
coverage (such as a termination of employment, or a divorce from or 
death of the covered employee). HIPAA changes this requirement so that 
a child who is born to the covered employee, or who is placed for 
adoption with the covered employee, during a period of COBRA 
continuation coverage is also a qualified beneficiary.

Duration of COBRA Coverage

    Under the COBRA rules there are situations in which a group health 
plan may stop making continuation coverage available earlier than 
usually permitted. One of those situations is where the qualified 
beneficiary obtains coverage under another group health plan. Under 
current law, if the other group health plan limits or excludes coverage 
for any preexisting condition of the qualified beneficiary, the plan 
providing the COBRA continuation coverage cannot stop making the COBRA 
continuation coverage available merely because of the coverage under 
the other group health plan. HIPAA makes a coordinating change to the 
COBRA rules so that if a group health plan limits or excludes benefits 
for preexisting conditions but because of the new HIPAA rules those 
limits or exclusions would not apply to (or would be satisfied by) an 
individual receiving COBRA continuation coverage, then the plan 
providing the COBRA continuation coverage can stop making the COBRA 
continuation coverage available. The HIPAA rules limiting the 
applicability of exclusions for preexisting conditions become effective 
in plan years beginning on or after July 1, 1997 (or later for certain 
plans maintained pursuant to one or more collective bargaining 
agreements).
Notice to Employees
    As indicated above, group health plans maintained by State and 
local government employers subject to Title XXII of the PHS Act are 
required to notify their qualified beneficiaries who have elected 
continuation coverage of the amendments described above. This notice is 
required to be given by November 1, 1996. This Department believes that 
supplying qualified beneficiaries with the information set forth above 
(or with a copy of this notice) would constitute compliance with the 
notice requirement of section 421(e) of HIPAA if this information is 
sent to each qualified beneficiary who has elected continuation 
coverage by first class mail at the last known address of the qualified 
beneficiary by November 12, 1996.
    This Department published a notice in the Federal Register on 
January 7, 1987, setting forth guidance on the Title XXII requirements. 
52 FR 604-606. Included as an appendix to that notice was a model 
statement that covered employers (or the group health plans they 
maintain) could provide their employees about their continuation 
coverage rights. We also urge these employers to modify the general 
notice regarding continuation coverage rights to make it consistent 
with the HIPAA amendments. As provided in section 2206 of the PHS Act, 
the group health plan maintained by these employers must provide such 
notice to their employees at the time of commencement of coverage under 
the plan; in addition, the employer, the employee, and the plan 
administrator have certain other notice requirements related to 
specific qualifying events.

    Dated: October 25, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 96-27964 Filed 10-29-96; 8:45 am]
BILLING CODE 4150-04-M