BASIC - COBRA Regulation Changes Due to COVID-19
As part of the response to the COVID-19 National Emergency,
the Department of Labor and Internal Revenue Service issued joint regulations
on April 29, 2020, providing significant extensions of various deadlines
applicable to employee benefit plans, especially group health
plans. This includes extending the election period for COBRA
continuation coverage, the date for making COBRA premium payments, and the
timeframe a plan/sponsor has to provide a COBRA election notice.
We understand that during this time of uncertainty, employers
across the nation have been forced to reduce their workforce and have many
questions regarding the impact of COVID-19 on COBRA compliance. We are
closely monitoring the rapidly changing legislation so that we can inform our
clients and participants about relevant changes. The purpose of this FAQ is
to answer some of the questions regarding the changes in COBRA continuation
regulations during the pandemic, specifically regarding deadline extensions.
Q: What is the
“Outbreak Period” and how does it apply to the deadline extensions?
A: The “Outbreak Period” runs retroactively from March 1,
2020 to 60 days after a yet-to-be announced end of the COVID-19 National
Emergency (or such other date announced by the Departments in a future
notice), but no longer than one year. Generally, the impact of the
normal deadlines under COBRA are paused during the Outbreak Period and
start-up again after the Outbreak Period ends.
Q: What do
these deadline extensions mean for employers in regards to COBRA
continuation?
A: The extensions provide employers with additional time to
provide a COBRA election notice after a qualifying event occurs. However,
BASIC recommends that employers continue to distribute required notices and
disclosures according to the previous rules and timeframes, if possible.
Employers should also know that they are permitted to furnish notices
electronically during the Outbreak Period.
Q: What do
these deadline extensions mean for employees/participants?
A: The extensions provide participants additional time to
notify the plan of certain qualifying events (e.g., divorce or legal
separation, aging out by dependent children, or disability
determinations). The extensions also provide participants additional
time to elect and pay for COBRA continuation coverage. Participants will
still be required to pay premiums, but they will not be due until at least 60
days following the end of the Outbreak Period (which has not yet been determined).
Nonpayment will likely result in an interruption of coverage; however,
coverage will be reinstated retroactively to prevent a gap in coverage once
payments are made.
Participants are encouraged to pay premiums
under normal grace periods to lessen the impact of delayed coverage,
temporarily denied claims, or avoid a balloon payment at the end of the
Outbreak Period that represents multiple months of premiums due.
Q: Are
employers required to comply with the deadline extensions under the regulations?
A: Yes, an employer must allow a COBRA participant
additional time to elect COBRA and make payments. However, as explained
below, coverage will likely be suspended until the payment has been made in
full. This may cause a delay or denial in claims being processed for the
participant by the carrier. BASIC recommends that employers check in with
their group health plan carriers to understand how the carriers will handle
claims and appeals in these situations.
Q: How will
BASIC administer the deadline extensions for COBRA continuation coverage?
A: In Q&A sessions held after the regulations were
issued, the Department of Labor provided clarification regarding permissible
COBRA administration strategies during the Outbreak Period. Consistent
with this informal guidance, BASIC will continue to process notifications
under the existing timelines for COBRA continuation. COBRA coverage will
continue to be terminated based on existing grace periods and postmark dates.
Extensions under the regulations will be managed on an individual basis as
BASIC is contacted by employees/participants.
BASIC notices have been updated to include notification to
employees/participants of their right to extended election and payment
deadlines. Additionally our notices for termination due to failure to
make a payment were updated to inform the participant of their rights, the
impact of a failure to make a payment, and instructions on next steps.
BASIC will continue to encourage
participants to pay premiums under normal grace periods to lessen the impact
of delayed coverage, temporarily denied claims, or avoid a balloon payment at
the end of the Outbreak Period that represents multiple months of premiums
due.
Q: Can a
participant extend their federal COBRA continuation period?
A: Not at this time. There have been no updates in the
regulations to allow for additional coverage periods outside of the standard
Federal COBRA guidelines. Participants may have other health coverage
available to them, including coverage through the Health Insurance
Marketplace at www.HealthCare.gov or
by calling 1-800-318-2596.
Q: What is the
COBRA obligation for an employer that is going out of business?
A: Unfortunately, if an employer is going out of business
and plans will cease to exist, there is no obligation to offer COBRA to
employees losing coverage. At this time, we recommend that any employees
losing coverage due to a permanent closure refer to the Health Insurance
Marketplace at www.HealthCare.gov or
call 1-800-318-2596 to find a plan that works for them.
Please don’t hesitate to reach out to us if you have further
questions or require assistance.
Sincerely,
BASIC
Phone: 877.262.7202
cobra@basiconline.com
cobra@basiconline.com
BASIC | 9246 Portage Industrial Dr., Portage, MI 49024