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Employee Benefits Timeframe Extensions Affect COBRA

May 1, 2020

Scott Lyon, Senior Vice President

Earlier this week, the Departments of Labor (DOL) and Treasury, in consultation with the Department of Health and Human Services (DHHS) issued new rules imposing mandatory timeframe extensions for several employee benefits compliance requirements. Eight in total.  The rules come in response to President Trump’s March 13, 2020 Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak, and the invocation of an emergency determination under Stafford Act beginning March 1, 2020. 

These new rules impact:  The HIPAA Special Enrollment Period, The COBRA Election Period, The COBRA Premium Payment Period, COBRA Notices from Employees, Health Plan Benefit Claim filing Deadline, The ERISA Adverse Benefit Determination Appeal Deadline, Rules around deadlines for and external review of an adverse claim decision and the deadline to Submit Additional Information related to External Review requests.

The extensions of employee and dependent timeframes run from March 1, 2020 until 60 days after the announced end of the National Emergency period or a later date if the National Emergency is extended. DOL, Treasury and DHHS use April 30, 2020 as the assumed end-date of the National Emergency in all examples.  However, these dates are for the example only and we cannot assume these dates will ultimately apply.  The Departments state they will issue additional guidance if there are different Outbreak Periods for different parts of the country.

Because most SBAM members’ health plans are fully insured, we believe the insurance carrier will help small business owners comply with many of these extended deadlines.  However, that statement is not necessarily true with regard to COBRA.  Because Small Business Insurance Services is in the business of COBRA administration, we thought we should take a minute to provide agents with an overview of these new extended deadlines.  With regard to COBRA Administration, here is what you need to know:

The COBRA Election Period

Under COBRA, employees and dependents who lose active coverage as a result of a qualifying event have 60 days to elect continuation coverage from receiving the COBRA election notice.

The new rule extends the 60-day COBRA election period.

Example:

  • Employee is terminated and loses active coverage under the health plan.

  • Employee receives the COBRA election notice on April 1, 2020.

Result:

  • The standard 60-day COBRA election period is extended..

  • Now, assume the National Emergency ends April 30, 2020, and therefore the Outbreak Period ends June 29, 2020.  The employee would have until 60 days after the end of the Outbreak Period (until August 28, 2020) to elect COBRA.

The COBRA Premium Payment Period

Under COBRA, qualified beneficiaries have 45 days from the COBRA election to make the first premium payment, and subsequent monthly payments are to be made within the 30-day grace period that starts at the beginning of each coverage month.

The new rule extends the 45-day initial premium payment and 30-day grace period for subsequent premium payment timeframe.

Example:

  • Employee is a COBRA qualified beneficiary who fails to pay COBRA premiums by the end of the 30-day grace period for March, April, May, and June.

Result:

  • The standard 30-day COBRA premium payment grace period is extended

  • Assume the National Emergency ends April 30, 2020, and therefore the Outbreak Period ends June 29, 2020.  The employee would have until 30 days after the end of the Outbreak Period (until July, 2020) to make the COBRA premium payment for the months of March, April, May, and June.  During this time, the employee is eligible to receive coverage under the plan during this interim period, even though some or all premium payments may not have been paid.

  • If the employee makes a premium payment for only two months of coverage by July 29, 2020, those premiums would apply to the first two months that remained unpaid (March and April), and there would be no COBRA coverage for any month after April 2020.

COBRA Notices from Employees re Divorce/Legal Separation, Child Reaching Age 26, and Disability

Under COBRA, the employee or dependent is responsible for notifying the plan within 60 days of the following qualifying events:

  • A divorce or legal separation causing the spouse to lose plan eligibility;

  • A child losing eligible dependent status (typically upon reaching age 26).

For a COBRA qualified beneficiary to qualify for a disability extension of the maximum coverage period from 18 to 29 months, the qualified beneficiary must (among additional requirements) notify the plan within 60 days of the SSA disability determination. Failure to timely notify the plan of these events can cause the employee or dependent to lose COBRA rights under the plan.

The rules extend the 60-day employee COBRA notification timeframe.

Example:

  • Employee and spouse are covered under the employer-sponsored group health plan.

  • Employee and spouse finalize their divorce effective April 1, 2020, causing the spouse to lose eligibility for coverage.

Result:

  • The 60-day period for the employee/spouse to notify the plan of the divorce to preserve the former spouse’s COBRA rights is extended.

  • Assume the National Emergency ends April 30, 2020, and therefore the Outbreak Period ends June 29, 2020. The employee/spouse would have until 60 days after the end of the Outbreak Period (until August 28, 2020) to notify the plan of the divorce qualifying event and preserve COBRA rights for the former spouse.

Have trust in our abilities.  We are currently working with our software partner to make sure these extended timeframes are seamlessly administered.  If you have any questions on how these new rules apply to your clients or their employees, please click here to reach out to our COBRA team

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