On May 1, 2020, the Department of Labor (DOL) announced the first new updates to COBRA coverage since 2014. These updates, spurred by the COVID-19 pandemic, require the attention, and likely action, of employers across the country. Keep reading for a brief introduction into what is COBRA coverage. Then, keep going to learn these new updates.
What is COBRA Coverage?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act (COBRA). The act is protection contained in the Employee Retirement Income Security Act (ERISA), which sets standards to protect employee benefits. One of these protections is COBRA.
COBRA requires group health plans to offer continuation coverage to covered employees, former employees, spouses and former spouses, and dependent children. This continuation coverage must be provided when group health coverage would otherwise be lost due to specific events. These events include:
- A covered employee’s death
- A covered employee’s job loss or reduction in hours for reasons other than gross misconduct
- Covered employee(s) becoming entitled to Medicare
- A covered employee’s divorce or legal separation
- A child’s loss of dependent status (and therefore coverage) under the plan
You can the full details of COBRA Continuation Coverage here.
2020 COBRA Updates
The DOL and other federal agencies released new COBRA updates and notices. These updates were issued to minimize the possibility of participants and beneficiaries losing their benefits during the COVID-19 pandemic.
Updated COBRA Notices
Part of the new COBRA changes was the release of updated COBRA notices. The models are for the General or Initial Notice, and the Election Notice. These notices inform plan participants of their rights to health continuation coverage upon a qualifying event. Employers should use these new notices as a reminder to ensure plan participants receive timely and adequate information about their COBRA rights.
— Download a model of COBRA Continuation Coverage General Notice Instructions and Notice
— Download a model of COBRA Continuation Coverage Election Notice Instructions and Notice
— Read an FAQ Sheet about the new COBRA Model Notices
COBRA Deadline Extensions
A day before the release of new COBRA notices, the DOL and Internal Revenue Service (IRS) issued a joint notice. This notice extended certain time frames affecting a participant’s right to continuation of health plan coverage under COBRA after employment ends.
Typically, a qualified beneficiary has 60 days from the date of receipt of the COBRA notice to elect COBRA. They have another 45 days after the date of the COBRA election to make the initial required COBRA premium payments. Plus, COBRA coverage may be terminated for failure to pay premiums timely. A premium is considered timely if paid within a 30-day grace period.
The joint notice extends the above deadlines, and other deadlines, by requiring plans to disregard the period from March 1, 2020, until 60 days after the announced end of the National Emergency. This National Emergency is known as the “Outbreak Period.”
Election Period Extension
Once a participant receives their timely COBRA election notice, the applicable COBRA deadlines are now extended until after the Outbreak Period ends. For COBRA election purposes, this means if a qualifying beneficiary receives the election notice on or after March 1, 2020, the 60-day initial days after that to make the required COBRA premium payments. This affords qualified beneficiaries more time to elect and pay for coverage retroactive to the date coverage is lost.
For example, if the National Emergency is proclaimed to end on May 31, 2020, the Outbreak Period will be deemed to end on July 30, 2020. If an employee was provided a COBRA election notice on April 1, 2020, that person’s initial COBRA election deadline is extended from the original date of May 31, 2020, to a new deadline of September 28, 2020.
Note, the original election deadline marks the 60th day from the date of receipt of the COBRA election notice. The new election deadline marks 60 days from the end of the Outbreak Period. So, that individual then has 45 days to make the first COBRA premium payment for all coverage back to the original date of coverage loss.
Premium Payment Extension
For individuals already on COBRA, the deadlines to make required monthly premium contributions are extended until 30 days after the end of the Outbreak Period. And the guidance makes clear any employer or health insurance carrier cannot terminate coverage or reject any claims for nonpayment of premiums during this period. Such coverage termination can only occur if the individual fails to make all the required monthly premium contributions at the end of the Outbreak Period.
For example, if an individual previously elected COBRA and has been paying premiums since March 1, 2020. That individual doesn’t pay applicable monthly COBRA premiums for April, May, June, or July. Under the extension guidance, the plan must give the individual until 30 days after the end of the Outbreak Period, or, August 29, using the previous example.
The individual has this until this time to fully pay all prior months of COBRA premiums to maintain the COBRA coverage. Health plans and insurance carriers must hold all claims submitted during the extension period to know whether coverage will or won’t be paid as required.
Employer COBRA Notice Period Extension
The joint notice possibly also provides plans, plan administrators, and employers to have extra time to provide the COBRA election notice. But, as of now, the guidance is unclear about how this possible extension period may apply.
It’s okay to ask for help, especially for something as complex and potentially costly, as COBRA compliance. If you want help ensuring your benefit plan’s compliance, contact our Compliance Expert at email@example.com.
Our HR Consulting Service includes a partnership with a full-service COBRA solution provider. So, contact The Olson Group for assistance with COBRA or any other facet of employee benefits compliance.