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Federal Agencies Issue Updated Guidance on COBRA

May 11, 2020

In the last week, federal agencies have issued two sets of guidance that impact the administration of continuation benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).

Changes to COBRA Timelines

On May 4, 2020, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and the Internal Revenue Service (IRS) issued regulatory guidance extending certain timeframes under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code for group health plans, disability and other welfare plans, pension plans and participants and beneficiaries of these plans during the COVID-19 national emergency. These changes were made both to minimize the possibility of individuals losing benefits because of a failure to comply with statutory and regulatory timeframes and in recognition that affected group health plans may have difficulty during this time in complying with certain notice obligations.

The regulations impact timelines for COBRA, HIPAA special enrollment rights, claims procedures and external review processes and can affect group and individual health, disability and pension plans. This Briefing will discuss only the changes that affect COBRA timelines. We are issuing a second Briefing that summarizes the other changes in the regulations.

The guidance establishes a period of time from March 1, 2020 until 60 days after the announced end of the COVID-19 national emergency (or such other date announced by EBSA and the IRS in future guidance) as the “Outbreak Period.” All plans subject to COBRA continuation must disregard the Outbreak Period for purposes of the COBRA deadlines:

  • The 60-day election period for COBRA continuation coverage;
  • The date for making COBRA premium payments; and
  • The date for a group health plan, sponsor or administrator to provide a COBRA election notice.

The preamble to the regulations sets forth three examples of how this will work. All of the following examples assume that the national emergency ends on April 30, 2020 and therefore the Outbreak Period ends 60 days later, on June 29, 2020.

Example 1: Electing COBRA. Individual A works for Employer X and participates in X’s group health plan. Due to the national emergency, Individual A experiences a qualifying event for COBRA purposes as a result of a reduction in hours below the hours necessary to meet the group health plan’s eligibility requirements and has no other coverage. Individual A is provided a COBRA election notice on April 1, 2020. In this case, the Outbreak Period is disregarded for purposes of determining Individual A’s COBRA election period. The last day of Individual A’s COBRA election period is 60 days after June 29, 2020, which is August 28, 2020.

Example 2: COBRA premium payments. On March 1, 2020, Individual C was receiving COBRA continuation coverage under a group health plan. More than 45 days had passed since Individual C had elected COBRA. Monthly premium payments are due by the first of the month. The plan does not permit qualified beneficiaries longer than the statutory 30-day grace period for making premium payments. Individual C made a timely February payment, but did not make the March payment or any subsequent payments during the Outbreak Period. As of July 1, Individual C has made no premium payments for March, April, May or June.

In this example, the Outbreak Period is disregarded for purposes of determining whether monthly COBRA premium installment payments are timely. Premium payments made by 30 days after June 29, 2020, which is July 29, 2020, for March, April, May, and June 2020, are timely and Individual C is entitled to COBRA continuation coverage for these months if she makes timely payment. Under the terms of the COBRA statute, premium payments are timely if made within 30 days from the date they are first due. In calculating the 30-day period, however, the Outbreak Period is disregarded, and payments for March, April, May and June are all deemed to be timely if they are made within 30 days after the end of the Outbreak Period. Accordingly, premium payments for four months (i.e., March, April, May and June) are all due by July 29, 2020. Individual C is eligible to receive coverage under the terms of the plan during this interim period even though some or all of Individual C’s premium payments may not be received until July 29, 2020. Since the due dates for Individual C’s premiums would be postponed and Individual C’s payment for premiums would be retroactive during the initial COBRA election period, Individual C’s insurer or plan may not deny coverage, and may make retroactive payments for benefits and services received by the participant during this time.

Example 3: COBRA premium payments, using the same facts as Example 2, above. By July 29, 2020, Individual C made a payment equal to two months’ premiums. Therefore, Individual C is entitled to COBRA continuation coverage for March and April of 2020, the two months for which timely premium payments were made, and Individual C is not entitled to COBRA continuation coverage for any month after April 2020. Benefits and services provided by the group health plan that occurred on or before April 30, 2020 would be covered under the terms of the plan. The plan would not be obligated to cover benefits or services that occurred after April 2020.

FAQs and Revised COBRA Model Notices

On May 1, 2020, EBSA issued Frequently Asked Questions (FAQs) under COBRA and revised COBRA model notices. Plan administrators can use these model notices to notify plan participants and beneficiaries of their rights under COBRA and qualified beneficiaries of their rights to elect COBRA.

The changes were prompted by concerns raised by several members of Congress and are intended to help Medicare-eligible Americans make key decisions regarding their healthcare coverage.

In general, COBRA allows employees (and their families) who would otherwise lose their group health coverage due to certain life events to continue their same group health coverage. These events include termination or reduction in hours, death of a covered employee, divorce or legal separation, Medicare entitlement and loss of dependent status. COBRA generally lasts for 18 months, but in some cases can last up to 36 months.

Under COBRA, group health plans must also provide covered employees and their families with certain notices explaining their COBRA rights. The revised model notices issued by the DOL provide additional information to address COBRA’s interaction with Medicare. The model notices explain that there may be advantages to enrolling in Medicare before, or instead of, electing COBRA. It also highlights that if an individual is eligible for both COBRA and Medicare, electing COBRA coverage may impact enrollment into Medicare as well as certain out-of-pocket costs.

The updated regulations can be found at:

https://www.govinfo.gov/content/pkg/FR-2020-05-04/pdf/2020-09399.pdf

A copy of the DOL’s FAQs can be found at:

https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-model-notices.pdf

The model notices can be found at:

https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra

If you have any questions regarding this Briefing or your plan’s COBRA continuation benefits, please contact your Account Manager.


Keenan & Associates is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.