How COVID -19 Has Impacted COBRA Coverage
COVID-19 has had a dramatic impact on the benefit provision surrounding COBRA. On April 28, 2020, new guidance was enacted for employers, insurers, and benefit plan vendors by the Department of Labor (DOL) and the Internal Revenue Service (IRS), aimed at mitigating the disruptive effect of COVID-19. The DOL and IRS issued a joint rule providing an extension of certain participant deadlines to enroll in health coverage, as it relates to electing and paying for COBRA coverage and making and appealing benefit plan claims. The new rules do not need to be explained to the participants, but it is recommended that the employer provide a notice of the new extended deadlines.
The joint rule provides that an “outbreak period” is ignored in determining the deadline for participants to:
- Elect Special enrollment in a health plan
- Elect or pay for COBRA coverage
The outbreak period is the period starting from March 1, 2020, until 60 days after the announced end of the COVID-19 National Emergency (at the time this post has been published, the end of the National Emergency has not yet been announced or indicated).
In an effort to explain the impact of the outbreak period, the following example will imagine the end of the COVID-19 National Emergency to be November 30, 2020. Thus, the outbreak period would end on January 29, 2021. This date does not reflect the actual end of the National Emergency, but will, instead, be used in our examples.
COBRA Elections
Generally, COBRA continuation coverage must be elected by the qualified beneficiary within 60 days of the date the plan administrator or COBRA vendor gives notice. However, the joint notice provides that the outbreak period is ignored in the determining the deadline.
An election period that begins or ends in the outbreak period will be extended, allowing the qualified beneficiary additional time to elect COBRA. If the qualifying event occurs during the outbreak period, the deadline will be 60 days after the end of the outbreak period.
Example: Using the imagined outbreak period dates above, if a qualified participant is eligible for COBRA on April 1, 2020, they will have until January 29, 2021, to elect COBRA.
COBRA Premiums
Plans cannot require payment of the initial COBRA premium earlier than 45 days after COBRA has been elected. After the initial 45-day premium period, there is a 30-day grace period for payment of the COBRA premium each month. The joint notice provides that the outbreak period is ignored in the determining the deadline for payment of COBRA premiums, which allows a participant a great deal of additional time to pay.
Example: If an employee was terminated on January 1, 2020, has elected COBRA, and the monthly premium is due the first day of each month, then premiums due beginning February 1, 2020, and during the outbreak period have an extended due date.
Premiums due February 1, 2020, would have a 30-day grace period until March 1, 2020, and ignoring the outbreak period assumed to end January 29, 2021, the February premium would be due January 30, 2021. Premiums for March 1, 2020 through January 1, 2021, would be due by March 2, 2021.
Please note that plans and insurers are not required to pay claims during a period for which COBRA premiums have not been paid, but must advise providers that the individual is covered subject to payment of premiums and claims, which have been suspended, then must be paid once premiums have been paid. This requires that the employer monitor the situation and inform insurers that the participant is covered pending premium payments.
Employee Notice of Qualifying Event or of Disability.
COBRA continuants must notify the plan administrator of a qualifying event within 60 days of the event. A qualified beneficiary who becomes disabled may qualify for an extension and must give notice within 60 days of the date of disability.
In both these situations, the deadlines are, again, based on the outbreak period ignored in the same manner as it is for the election and payments deadlines reviewed previously.
Please note that the joint rule does not apply the outbreak period to the date election notices needed to be provided to a qualified beneficiary. We strongly recommend that all employer and plan administrators adhere to the current requirements of the combined period of 44 days to provide a qualified beneficiary with a notice of a COBRA election following a qualifying event.
The DOL issued new model COBRA forms on May 1, 2020, which included an updated version of the model general notice and the model election notice.
Your ARC representatives are prepared with the most updated knowledge and resources surrounding how the COVID-19 pandemic is affecting your business. Contact us today with any questions or concerns.
