Tuesday, November 17, 2020

COBRA Headaches during the Pandemic

COVID-19 has brought numerous headaches to the administrative processes that run most employers' and employees' daily lives. One such headache is employer compliance with the Consolidated Omnibus Budget Reconciliation Act (COBRA).

As employers know, COBRA generally requires employers with 20 or more employees to offer employees and their families a temporary extension of health coverage (known as a continuation of coverage) for a limited period. You can read more about COBRA compliance, continuation coverage assistance, frequently asked questions, and more by clicking here. Under the statute, employees may elect COBRA continuation coverage under their employer's group health plan up to 60 days after a qualifying event.

As a result of the pandemic, the U.S. Department of Labor (DOL) and Internal Revenue Service (IRS) jointly published the Extension of Certain Timeframes for Employee Benefit Plans, which contains temporary rule changes to COBRA. The new rules extend traditional statutory deadlines, which can cause some administrative confusion for employers.

As it relates to COBRA, group health plans, disability, and other employee welfare plans "must disregard the period from March 1, 2020, until sixty (60 days) after the announced end of the National Emergency or such other date announced by the Agencies in a future notification." The notice labels this period as the "Outbreak period." On March 13, 2020, President Trump issued Proclamation 9994 (Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak), which became effective on March 1, 2020, and has yet to expire.

Notably, the 60-day extension applies to the following deadlines:

  • The 60-day election period for COBRA continuation coverage;
  • The date for making COBRA premium payments;
  • Procedural dates for filing and responding to claims (see the notice for more details).

The notice provides examples of the first two bullet points. If theoretically, the outbreak period ended on April 29, 2020, and Employee A experienced a qualifying event (furloughed by the employer to reduce workforce) on April 1 and was provided notice of COBRA eligibility, Employee A would have until August 28, 2020 (because June 29, 2020, was the theoretical end of the 60-day extension) to elect COBRA benefits. This is the case because Employee A would typically have 60 days to elect COBRA benefits when notified, but the rule change awards a 60-day grace period for the deadline.

A similar scenario occurs for payment of COBRA premiums. Using the same facts as above, let's say a qualifying individual (Employee B) received COBRA continuation coverage on March 1, 2020 (with the 45-day period to pay benefits already passed). Employee paid their premium in February but did not pay between March-June. In this case, Employee B must pay premiums by July 29, 2020 (60 days after the theoretical April 29, 2020 end of the outbreak period, and 30 days to meet the statutory deadline for payment of premiums). The guidance states that Employee B, in this case, would be eligible to receive coverage under the terms of the plan during this period, even though some of Employee B's premium payments may not be received until July 29, 2020.

Using the facts above, if Employee B made premium payments on July 29, 2020, but only premium payments for March and April (two payments), the plan would only have to cover claims made during those months. The plan would not be obligated to cover benefits or services occurring after April 2020.

COVID-19 renders an already complicated administrative regime that much more convoluted. To ensure compliance, employers should be keenly attentive to any changes to COBRA rules as the U.S. continues to address the ongoing global pandemic. Please seek appropriate legal counsel and meet with your plan administrator to keep updated on COBRA-related issues.