Benefits Briefs in the Time of COVID-19, Part 8: COBRA Complications

Dickinson Wright

Dickinson Wright

The DOL and IRS recently issued final regulations (the “Final Rule“) that extend notice and premium payment periods for participants and plans under COBRA.  Specifically, a group health plan must disregard the period from March 1, 2020 through 60 days after the announced end of the COVID-19 national emergency (the “Outbreak Period”) in determining, among other items:

  • The 60-day COBRA election period;
  • The date for making a COBRA premium payment; and
  • The date for individuals to notify the plan of (a) a qualifying event that is a divorce/legal separation or a dependent child who loses eligibility or (b) a Social Security determination of disability.

For a group health plan, the Outbreak Period is disregarded when determining the date for providing a COBRA election notice. The extended period may be useful if the plan fails to send a COBRA election notice during the Outbreak Period, but we encourage plan administrators to continue to send COBRA notices on a timely basis if feasible so that participants are advised of their rights.

For example, assume that the announced end of the national emergency is May 31, 2020, which means the Outbreak Period ends 60 days later, or July 30, 2020.

  • An employee receives a COBRA notice dated April 1, 2020. Normally, the employee would be required to make a COBRA election by May 30, 2020, 60 days after the notice.  However, the “Outbreak Period” is disregarded and the employee would have 60 days after July 30, 2020 to make a COBRA election.  If elected, coverage would be reinstated as of the original loss of coverage and the employee would owe COBRA premiums back to that date.
  • A qualified beneficiary has elected COBRA as of April 1, 2020. The qualified beneficiary fails to make premium payments for April, May, June and July.  Normally, the grace period for premium payment would end on April 30, 2020 and COBRA coverage would be terminated effective April 1.  However, the “Outbreak Period” is disregarded and the qualified beneficiary would have until August 29, 2020 (30 days after the end of the Outbreak Period) to make any missed premium payments.

The extended time periods raise a number of issues for group health plans that are not addressed in the Final Rule, including:

  1. Do individuals who experience a qualifying event need to be notified of the extended time periods? If so, does notice need to be given to individuals who are in the midst of an election period?
  2. Do existing qualified beneficiaries need to be notified of the extended period for premium payments? Should notice be given to all qualified beneficiaries or only to those who miss a premium payment?
  3. If an individual elects COBRA coverage with a retroactive effective date, will a health insurer honor the retroactive election? Must an employer continue to make premium payments during the election period?  Or, as permitted by the COBRA regulations during the normal 60-day election period, can claims be held pending an election and premium payment?

In our view, it would be prudent for a plan administrator to update its COBRA notice to reflect the extended time periods and to send a supplemental notice to existing qualified beneficiaries so that they are aware of the extended period for premium payments and other notice requirements.

Interestingly, a few days after the Final Rule was published, the DOL issued an updated model general COBRA notice and an updated model COBRA election form and related FAQs, which can be accessed here.  The model notices add new information on the interaction of Medicare and COBRA, but do not include any new provisions on the extended time periods.   We recommend that plan administrators use the model COBRA notices, as appropriately completed and supplemented, as the model notices are deemed to comply with COBRA’s notice content requirements.

This post is a part of the All Things HR Blog’s multi-part series on frequent issues and questions faced by employers during the COVID-19 crisis.

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Dickinson Wright

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