Impact of the COBRA Extension Interim Final Rule

On January 31, 2020, the Department of Health and Human Services (HHS) initially declared a federal public health emergency due to the coronavirus. The declaration has now been extended twice, including the latest extension on July 23, 2020. Unless the declaration is terminated or extended further, it will expire on October 23, 2020.

This public health emergency declaration is important for health plan sponsors to be aware of because it determines the period in which group health plans and insurers must pay for COVID-19 tests and related services without requiring cost sharing. Other plan requirements, including the extended deadlines related to the Consolidated Omnibus Budget Reconciliation Act (COBRA), special enrollments, and claims and appeals, are attached to a different COVID-19 emergency declaration—the national emergency declared by President Trump on March 13, 2020, retroactive to March 1, 2020. This declaration does not expire automatically.

As a result of the national emergency declaration, the Department of Labor Employee Benefits Security Administration (EBSA) and the Internal Revenue Service (IRS) released a temporary final rule on May 4, 2020, entitled the Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak. The rule affects COBRA continuation coverage for both plan sponsors and COBRA beneficiaries.

Impact of the COBRA Extension Interim Final Rule

What is the Outbreak Period Mentioned in the Temporary Final Rule?

The “Outbreak Period” is the timeframe from March 1, 2020 until 60 days after the announced end of the national emergency (or a date announced in future notifications). During the outbreak period, time frames are extended with no deadlines for plan sponsors to provide a COBRA election notice or for beneficiaries to elect COBRA coverage, make premium payments for COBRA continuation coverage, or notify the plan of a qualifying event or disability.   

How do the COBRA Extensions Impact Plan Sponsors?

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COBRA Notice Extension

Prior to the temporary final rule, the plan sponsor was required to send a COBRA election notice within 14 days after a qualifying event such as a termination or loss of eligibility. Under the temporary final rule, the plan sponsor can disregard the outbreak period. However, plan sponsors that fail to send a COBRA election notice could risk an ERISA violation, penalties or potential liability for medical claims incurred during that time. Plan sponsors will want to act in good faith by keeping their normal COBRA procedures including sending the election notice as soon as administratively possible.

COBRA Election Period

Employees and dependents who lose active coverage because of a qualifying event, such as termination of employment or reduction of hours, generally have 60 days to elect COBRA after receiving an election notice. Under the temporary rule, once the administration declares the national emergency over, COBRA beneficiaries can keep their COBRA options open for 120 days—60 days after the national emergency is declared over, with another 60 days allowed as part of the existing COBRA rule. During the outbreak period, there are no deadlines for beneficiaries to elect COBRA.

COBRA Premium Payments

Under existing COBRA rules, beneficiaries had an additional 45 days after electing COBRA to make their first premium payment. However, under the temporary rule, COBRA premiums due during the outbreak period are not considered late if the premiums are paid within 45 days following the end of the outbreak period. By delaying payment during this period, beneficiaries could find themselves owing thousands of dollars in retroactive premiums.

[Related Reading: COBRA’s Interaction With HSAs, HRAs and FSAs]

What Does the Temporary Final Rule on COBRA Extensions Mean for Plan Sponsors?

Fully insured and self-funded plan sponsors should:

  • Prepare for administrative challenges and complications these deadlines may create, including having to provide and pay for coverage while an individual’s status is still uncertain
  • Notify qualified beneficiaries about the extensions that may apply to them, so that individuals are informed of their COBRA rights
  • Communicate with the stop-loss carrier to determine how claims will be handled
  • Ensure that the claims processor who takes calls from participants and providers asking about coverage status is aware of the potential delays that could occur and answers questions accordingly
  • Review their plan documents and summary plan descriptions for needed amendments and summaries of material modification due to the extensions. Any required amendments to plan documents must be made no later than December 31, 2020, although a revised summary of material modification should be sent as soon as practical to plan participants.

[Related Reading: Medicare and COBRA Coordination During COVID-19]

Learn More

Enroll today in the International Foundation COBRA e-learning course. The course will explain the technicalities of COBRA, including who is entitled to COBRA and how it must be administered.

Additional resources:

Anne Newhouse, CEBS
Anne Newhouse, CEBS
Information/Research Specialist at the International Foundation of Employee Benefit Plans

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