New Rule Has Major COBRA Deadline Implications

New Rule Has Major COBRA Deadline Implications

On April 29, 2020, the Departments of Labor and Treasure issued a COVID-19 national emergency final regulation. The new rule takes effect immediately, is retroactive back until March 1, 2020, and will have a significant impact on COBRA administration. It changes the initial COBRA election period, the deadline for making COBRA coverage premium payments, and the timeframe for employers to provide COBRA election notices, until the Trump Administration announces the end of the COVID-19 national emergency.  The emergency rule calls this time period “the outbreak period.”

The emergency rule declares the COVID-19 outbreak period does not count for COBRA election purposes. Put another way, if a person presently has a COBRA election period ending between March 1 and the close of the national emergency, they now have until 60 days after the expiration of the COVID-19 emergency period to choose COBRA continuation coverage. This election period change applies regardless of when the initial election period should have ended.  So many people will have much longer than 60 days to elect COBRA.

Example: If the national emergency period ended today, then the outbreak period would end on June 30, 2020. So, in this scenario, a person whose COBRA election period began on March 15, 2020, now has until at least August 29, 2020, to choose COBRA. Their election period does not expire on May 14, 2020, as it would under normal circumstances.

The emergency rule also makes a considerable change to the COBRA payment deadline. If someone does not make all or some of their COBRA payments during the COVID-19 outbreak period, a carrier or employer cannot terminate coverage for delinquent payment. This new requirement doesn’t just apply to people who are newly eligible for COBRA either. The examples in the rule make it clear that if someone elected COBRA either before or after March 1 and did not make their March payment yet, coverage cannot terminate for late payment.  If terminations for a March late payments already occurred, the carrier and employer must reinstate affected beneficiaries.  Once the Trump Administration declares the national emergency over, COBRA recipients will then have 30 days to make all outstanding payments. If a person cannot make all of their back-due payments within the 30-day window, their coverage may be retroactively limited to the months for which they do pay.

Example: If a current COBRA beneficiary did not make any COBRA payments in March, April, May, and June of 2020, and the national emergency period ended today, then the person technically would not owe any money until July 30, 2020.  At that point, they would need to pay all of their back-due premiums. If they could only pay two months of premium by July 30, 2020, then the plan could terminate their coverage as of April 30, 2020.  The two months of payments would apply to the first two months for which premiums were due.

Another COBRA extension in the rule relates to COBRA election notices. The regulation gives employers until after the end of the national emergency to deliver COBRA election notices. However, this employer deadline extension seems to conflict with the new beneficiary deadline rights.  It is unknown how a COBRA-qualified beneficiary will know about the new outbreak period relief without a notice. The new regulation also does not give employers a COBRA election notice template with the updated deadline dates.  Kistler Tiffany Benefits is currently working with the Trump Administration to gain clarification about these points.

In addition to the COBRA deadlines, the regulation extends the regular timeframes for group health plan participants to:

  • Request a special enrollment period under ERISA;
  • Notify the plan about a qualifying event or determination of a disability;
  • File a benefit claim;
  • File an appeal of an adverse claim determination;
  • File or amend an external review.

The standard timeframes all now restart after the end of the outbreak period or another date that may be announced by the Trump Administration in the future.

The Trump Administration issued EBSA Disaster Relief Notice 2020-1 as well, which provides more employer group benefit plan deadline relief. It clarifies that group plans that need to postpone plan deadlines during the COVID-19 outbreak period but act in good faith do not violate ERISA.  Any employer plan sponsor that cannot issue a notice, disclosure, or document on-time between March 1, 2020, and 60 days after the announced end of the COVID-19 national emergency, just needs to issue the required materials as soon as practical.  Group plans can also use reasonable electronic alternative means of communicating during the coronavirus outbreak period, including email, text messages, and continuous access websites.

The notice asks plans to act reasonably, prudently, and in the interest of the covered workers and their families who rely on their employee benefit plans. Plan fiduciaries should make reasonable accommodations to prevent or minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes.

 

Updated COBRA Notices –

Despite the guidance from the DOL, the Employee Benefit Security Administration (EBSA) updated its model COBRA notices on May 1, 2020.  The notices updated notices do not take into account the amendments to COBRA deadlines published yesterday, and it’s unclear to what extent the model COBRA notices will updated further.  In meantime, employers need to be aware that the model COBRA notices do not incorporate yesterday’s guidance, and should be used with that understanding.

News Release: https://dol.gov/newsroom/releases/ebsa/ebsa20200501

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