A foreword from Gina:
Sandy Wood, Chief Benefits Consultant at The Benefits Academy, is one of my go-to sources. She truly is one of the smartest, savviest benefits experts I know and I rely on her for counsel and guidance frequently. When the DOL and IRS started tinkering with COBRA deadlines, she was my first call. She graciously agreed to allow SBA to share her insights on the new COBRA changes and what this means for everyone who is in the administrative line of fire. Here’s my (very) brief synopsis. Read on to get the details and possible solutions.
| Old | New |
| A qualified beneficiary had 60 days to elect COBRA from the loss of coverage date or the date the COBRA notice was mailed, whichever is the latter | Anyone with a qualifying event on or after March 1, 2020 may elect COBRA at anytime until the announced end of the National Emergency or such other date announced by the Agencies in a future notice. |
| COBRA participants, once enrolled, have 30 days grace period to pay premiums. Example: May premium is due May 1st but an envelope postmarked May 30th will be accepted and considered “on time.” | COBRA participants, once enrolled, have 30 days grace period to pay premiums. If they cannot pay the premium, they cannot be terminated due to failure to pay. As of today’s date, insurance carriers are scrambling to figure out how to handle this. |
The DOL and IRS announced in late April that certain deadlines would be extended for participants to make health plan election changes or to elect and pay for COBRA. Certain employer notice deadline requirements also fall under this new guidance. The race to peel back the onion to determine exactly what would need to be done to comply with the new rules began immediately. There would need to be notice wording changes for sure, but since the guidance became effective retroactively, there would need to be reversals of enrollment denials and terminations for nonpayment. Of concern to administrators – their automated systems will need an upgrade to allow for open-ended deadlines. As for carriers – they will need to add processes to pend COBRA coverage for Qualified Beneficiaries who have not paid their premiums. Unfortunately, this new guidance won’t be easy to actually implement.
The Outbreak Period
The new guidance “tolls” deadlines during the Outbreak Period, which is defined as beginning on 3/1/2020 and ending 60 days after the announced end of the COVID-19 National Emergency. Basically, “tolling” ignores the days during the Outbreak Period when calculating deadlines. For example, assume an employee is eligible for COBRA starting on 4/1/2020, and the employer provided the COBRA notice prior to 4/1/2020. Under normal COBRA rules, the Qualified Beneficiary would have 60 days from 4/1/2020 to elect COBRA (deadline of 5/30/2020). Under this new rule, they would now have 60 days from the end of the Outbreak Period to elect COBRA.
It gets more complicated for deadlines where the clock started ticking prior to 3/1/2020. For example, assume an employee elected COBRA back on 2/25/2020, but they have not yet paid their first premium. Under normal COBRA rules, they would have 45 days from 2/25/2020 to pay retroactive premiums. Under this new rule, they would have used up 4 days toward their 45-day deadline (2/26-2/29). Once the Outbreak Period has ended, they will continue to have their remaining 41 days to pay the retroactive premiums.
Notices, Elections, and Payments Affected
ERISA requires plans to allow employees to make changes to their elections mid-year if there is a change in family status, usually providing a 30 or 60 day deadline from the date of the change. Under these new rules, these deadlines will be extended, “tolling” the days attributable to the Outbreak Period. Since COBRA members are to be treated as any other active employee, these deadline extensions apply to them as well.
In addition, COBRA Qualified Beneficiaries will have additional time to elect COBRA, make their first payment, and remit additional monthly payments. They will also have more time to request a disability extension of COBRA coverage, which changes the duration of COBRA from 18 to 29 months due to a determination of disability by Social Security. Employers will have a reprieve, too. Under normal COBRA regulations, the employer and administrator have up to 30 days and 14 days, respectively, to provide COBRA Qualifying Event notices to terminating participants. While the new guidance allows employers to ignore any days that fall into the Outbreak Period, it is still recommended the Qualifying Event notice be sent out timely.
Tracking Days
Because the Outbreak Period is open-ended, changing automatic systems and procedures will not be straight forward. Most administrators and insurance carriers are starting to realize the massive impact these changes are going to require them to make in their internal systems. They will need a three-pronged approach to deal with “active” participants’ deadlines, prior participants’ deadlines, and future communications to all affected participants once the government ends the COVID-19 National Emergency.
As noted in the prior examples, deadline periods that begin on 3/1/2020 or after will be fairly straightforward; once the Outbreak Period ends, the normal deadline timing will be applicable. However, for deadline periods that started prior to 3/1/2020 and had not yet ended prior to 3/1/2020, this is where tracking will be paramount since each participant’s deadlines will be different. Once the COVID-19 National Emergency has been lifted, administrators will need to notify each participant of their new final deadlines.
COBRA Status
The typical enrollment process under COBRA has been for the employer (or administrator) to notify the carrier to terminate the Qualified Beneficiary from active coverage. Once the person elects and pays for their COBRA coverage, the employer (or administrator) would send payment to the carrier and request reinstatement of coverage.
Insurance carriers are not required to pay claims during any COBRA months for which payment has not been received. If a provider requests coverage specifications, the carrier must provide that information and advise that the person is either in their COBRA election period or their COBRA payment grace period. Typically, providers will submit the claims to the carrier, who will then pend them. These claims would be released only upon receipt of COBRA premium for the month in which the claims were incurred.
This of course can cause issues now that the payment of premiums can be extended indefinitely. It appears that while the employer (or administrator) will need to provide the carrier with payment of COBRA premiums as they come in the door, the carrier will need to manage their internal system to continually suspend eligibility for nonpayment and then release claims as these participants remit monthly premiums.
A word of caution, however. Some carriers include COBRA members along with active participants on one billing statement and require the employer to pay the bill in full without adjustments. If the client pays a lower-than-invoiced amount, the entire group can be pended or even terminated for insufficient payment. But employers are not going to be able to afford to float COBRA premiums that are several months late. Plus, the carrier is going to need to know which Qualified Beneficiaries should be suspended in their system so that claim payments are put on hold. A seemingly easy fix would be to have the carrier create a separate billing statement for COBRA members. But will the carrier require the COBRA billing to be paid in full without adjustments too? What if five of an employer’s COBRA members pay timely and a sixth does not? Will the carrier allow the client to remit just the payments they have received, with an indication of which Qualified Beneficiary paid and the amount they paid? Or will the carrier suspend all of the employer’s COBRA enrollees’ benefits until the straggler gets their payment in? It may behoove carriers to send a separate billing statement per COBRA qualified beneficiary to the employer to accurately track payments and process claims for those who have paid their COBRA premiums.
What’s an employer to do if their carrier(s) requires them to keep COBRA members on the active billing statement (or a separate COBRA statement) with a “pay in full” requirement? It will be a monthly yo-yo effect of terminating COBRA members, requesting reinstatement once another payment has been received, terming again effective at the end of the “paid through” month, and so on, and so on. Some employers (and administrators) continue COBRA members as “covered” during premium grace periods, then request refunds for those whose payments never arrive. In this new world, it would be better to terminate COBRA members who have not paid their premiums by the carrier’s internal billing deadline. This will reduce the amount of COBRA premiums being fronted by the employer and will also alert the carrier to suspend the COBRA participant’s coverage status. This method is not the best solution, but at least the employer won’t be fronting multiple months of premiums for all their COBRA participants until the Outbreak Period ends.
Going Retro
Since the new rules retroactively take effect on 3/1/2020, there are a number of prior denials that will need to be rescinded and notification templates where deadlines will need to be changed. Some of these are noted below, and all assume that the notice, election, or payment deadline fell on or after March 1, 2020.
Special Enrollment Periods – Any COBRA Qualified Beneficiary who was denied access to coverage for themselves or their dependents due to late notification to the employer (or administrator) will need to have their request approved and coverage offered.
Disability Extension – Any COBRA Qualified Beneficiary who submitted a request to extend COBRA from 18 months to 29 months due to Social Security’s determination of disability but was denied due to late submission of the request to the employer (or administrator) will need to have their request approved.
COBRA Terminations – Any Qualified Beneficiaries whose coverage was terminated due to untimely payment will need to be notified that they now have additional time to pay; and if they remit premiums the carrier will need to reinstate them.
COBRA Election Periods – Any Qualified Beneficiary whose 60-day election period was exhausted will need to be provided additional time to elect coverage; therefore, a notice outlining this will need to be provided.
The Bottom Line
Administering the extended deadlines under COBRA will present challenges for employers, administrators, and carriers. Prior determinations of lapses in coverage may need to be rescinded, new notifications will need to be created and mailed, and deadline information in current notices will need to be revised. A new carrier process for enrolling, pending, and releasing claims for those late in paying their COBRA premiums will need to be formulated. Plus, automated systems (such as those that kick out termination notices for those who have not paid COBRA within the usual grace period) will need to be updated or turned off. We may even see some carriers revolutionize the way COBRA billing is processed.
What are we seeing so far? Administrators seem to be reprocessing elections and revising/mailing notices quickly. However, most insurance carriers are still trying to determine how best to manipulate their systems to comply with the new guidelines.
About Sandy Wood.
Sandy Wood, CEBS, is President and Chief Benefits Consultant of The Benefits Academy (TBA). Sandy is Past President of the International Society of Certified Employee Benefit Specialists (www.iscebs.org). She is a sought after speaker and recognized industry expert.
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