Important Employer Information Regarding COBRA Changes
On May 1, 2020, The Department of Labor (DOL), through its Employee Benefits Security Administration (EBSA), released updates and clarifications related to the Consolidated Omnibus Budget Reconciliation Act (COBRA), including two new model COBRA notices, and an extension of deadlines for electing COBRA coverage and paying premiums. Additionally, new guidance regarding COBRA and Medicare interactions and non-COBRA health insurance options for terminated employees was included in a separate FAQ. These updates, driven by the COVID-19 pandemic, are applicable immediately and will expire on January 31, 2023 unless readdressed before then.
It is vital for plan sponsors to understand these updates and make changes to COBRA administration so as to avoid potential non-compliance liabilities.
Updated Model COBRA Notices — General Notice and Election Notice
These model COBRA Notice updates are for both the general (initial) notice and the election notice. The general notice is provided to employees and covered spouses within the first 90 days of coverage under the group health plan. The election notice is provided to qualified beneficiaries within 44 days of the qualifying event resulting in a loss of coverage. The notices inform plan participants and other qualified beneficiaries of their rights to continuation coverage upon a qualifying event.
While employers are not required to use the model notices, the DOL considers using the model notices, appropriately completed, to be good-faith compliance with COBRA’s notice content requirements. Aldrich Benefits strongly recommends that employers use the updated DOL COBRA notice forms, or some enhanced version of such notices.
If the updated model notices are not used, the employer should ensure that their COBRA notices include the most current information from the DOL. Because of the significant exposure for COBRA noncompliance, and because employers retain liability for COBRA compliance even if a third-party vendor is hired for COBRA administration, employers should have their COBRA notices regularly reviewed.
COBRA Deadline Extensions
On April 29, 2020, the DOL and Internal Revenue Service (IRS) issued a joint notice extending certain time frames affecting a participant’s right to continuation of group health plan coverage under COBRA after employment ends. Normally, a qualified beneficiary has 60 days from the date of receipt of the COBRA notice to elect COBRA and another 45 days after the date of the COBRA election to make the initial required COBRA premium payments. COBRA coverage may be terminated for failure to pay premiums promptly. A premium is considered timely if paid within a 30-day grace period.
The joint notice extends the above deadlines by requiring plans to disregard the period from March 1, 2020, until 60 days after the announced end of the National Emergency, known as the “Outbreak Period.”
Premium Payment Extension
Likewise, 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 that an employer or health insurance carrier cannot terminate coverage or reject any claims for nonpayment of premium 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, an individual previously elected COBRA and has been paying monthly COBRA premiums since March 1, 2020. That individual does not pay applicable monthly COBRA premiums for April, May, June, or July. Under the extension guidance, the Plan must allow the individual until 30 days after the end of the Outbreak Period (or, August 29, using the dates from the prior example) to fully pay all prior months of COBRA premiums to maintain the COBRA coverage. Again, 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.
Complications will likely result under this new guidance, and thus we strongly recommend working with your Aldrich consultant and COBRA administrator to ensure proper compliance is maintained throughout the Outbreak Period and beyond.
Medicare and COBRA
The May 1, 2020 FAQ document, in addition to addressing the issues previously discussed, provides guidance about how COBRA and Medicare may interact in terms of eligibility and coordination of benefits.
Election Period Extension
Once a participant receives his or her timely COBRA election notification, 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 COBRA election period does not begin until the end of the Outbreak Period. The participant then has another 45 days after that to make the required COBRA premium payments (that still apply back to the date on which previous employer coverage ended).
As an example, if the National Emergency period 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 will be extended from the original deadline of May 31, 2020, the 60th day from date of receipt of COBRA election notice, to a new COBRA election deadline of September 28, 2020 (i.e., 60 days from the end of the Outbreak Period). That individual then has 45 more days to make the first COBRA premium payment for all coverage back to the original date of coverage loss.
Participant Options for Coverage
Lastly, the DOL updated its ongoing FAQ guidance for participants to know and understand their health insurance and other benefit rights and coverage options before, during, and after the National Emergency period ends. While this guidance is directed to participants and beneficiaries, employers and plan sponsors may also want to consider providing terminated employees with options that can better meet their needs from a plan and financial perspective.
Alternatives to COBRA include public exchanges like HealthCare.Gov, OregonHealthCare.gov, or Covered California, private exchanges, or individual coverage purchased directly from insurance carriers. Your Aldrich Benefits Advisor can provide more detailed information
Aldrich is Here to Help
Our Aldrich Benefits team is monitoring the changing landscape of the insurance industry will continue to provide updates regarding and changes that may affect your plan. For more resources to help you navigate the developing impact of coronavirus on your business, visit our COVID-19 Resource Center. Please reach out to your Benefits Advisor if you have questions specific to your plan.