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COBRA Deadlines and the Emergency COVID-19 Regulation

May 1, 2020

¡Ay Corona! Friends, we need to talk about these new emergency regulations released by the Trump Administration. They extend specific employee benefit plan deadlines, including key COBRA deadlines.  No matter how we try and talk ourselves down off the ledge, we see COBRA administration drama in the near-term future. The regulation essentially stops the clock on all COBRA deadlines starting March 1, 2020, and lasting until 60 days after the Administration ends the COVID-19 national emergency, (aka the “Outbreak Period”). Can we discuss this?

COBRA Election Timeframe

Relative to COBRA elections,  qualified beneficiaries will have the Outbreak Period PLUS 60 days to determine if they wish to elect coverage.  For example, let’s say an employee loses coverage based on a termination of employment and receives their COBRA election notice on April 1, 2020.  Typically, she would have 60 days, or until May 31 to elect coverage.  Now, she has the Outbreak Period PLUS 60 days.  So, assuming the Outbreak Period ends June 29, she has until August 28, 2020, to elect coverage.

Payment Deadline

This new rule also extends the payment deadlines for COBRA premiums. This means that technically, no beneficiary needs to pay for coverage until the end of the Outbreak Period.  All COBRA premium payments that would have been otherwise due during the Outbreak Period are instead due 30 days after the end of the Outbreak Period.  If a qualified beneficiary is on COBRA as of March 1 and the Outbreak Period ends June 29, he would have until July 29 (30 days later) to pay premiums for March, April, May, and June.  In this example, the qualified beneficiary IS ELIGIBLE to receive coverage under the plan during the interim period. An employer or carrier cannot deny coverage until after the applicable deadline has passed.

COBRA Notice Extention

The last COBRA extension in the rule concerns election notices. Employers have until after the end of the national emergency to deliver them. Is it just us, or is this deadline extension in direct conflict with the new deadlines for beneficiaries? How is a COBRA-qualified beneficiary supposed to know about the Outbreak Period relief without a notice?  What if the lack of notice causes a person to make a regrettable health decision?  Who is liable?  What if some qualified beneficiaries learn about the new rights from an independent source but not others?

Lots of Employer Questions

From the employer’s perspective, what if they choose to forgo their notification deadline relief and tell people about their new COBRA rights. How do they do so legally? The new regulation does not include an updated COBRA election notice template with the new deadline extension information. So what language should a well-meaning plan sponsor rely on?

Another employer concern already presenting itself is reinstating coverage. The regulation makes it clear that if a person elected COBRA on say, March 2, but fails to make a March payment (or any subsequent payments during the Outbreak Period), the employer plan must disregard the Outbreak Period when calculating the 30-day payment grace period. The insurer or plan also may not deny the person’s coverage during the whole Outbreak Period. However, under typical COBRA rules, the person’s coverage would already be terminated for nonpayment of premium. With the new regulation, the person is still eligible for coverage. So how is the person in the example notified? To comply, it would seem the employer plan needs to reinstate coverage, so how do they handle it appropriately?

Since the new rule also extends COBRA election periods, we aren’t sure how many qualified people will choose COBRA right away. However, let’s assume a person with an ongoing medical issue qualifies  So the individual elects continuation coverage immediately. In that case, it would seem the person could choose to defer all premium costs until the end of the national emergency. Yet the employer plan is still bound to pay all of the resulting claims on time?

Beneficiary Cost Issues

Speaking of those deferrals, consider the state of the economy. How many COBRA beneficiaries will be able to pay all of their accrued premiums within 30 days of the end of the emergency period? If they cannot pay the past due amount, then coverage can be retroactively canceled.  However, then the resulting claims issues for all parties involved are going to be enormous.

Tell us, friends, how do you feel about the new rules?  Do you see any administrative issues we should keep our eye on?  Do you think the Trump Administration will issue clarifying guidance any time soon?  If so, we will be back to talk about it!