COVID-19 Relief Complicates Cobra Administration

Among the many employee benefit deadlines extended due to the pandemic by joint action of the Department of Labor and the Internal Revenue Service are the deadlines for making a Cobra election and paying the Cobra premiums.  For purposes of these deadlines, the COVID-19 “outbreak period” is disregarded.  President Trump declared COVID-19 as a national emergency as of March 1, 2020, which is the beginning of the “outbreak period.”  The national emergency will end when the President declares it ended.  The end of the “outbreak period” is 60 days after the end of the national emergency (unless the DOL/IRS provide a different deadline for these extensions).

Before addressing how the deadlines are affected by the extension, keep in mind the standard Cobra deadlines:

  • To elect Cobra − 60 days after the later of the loss of coverage and the date the election notice is sent (e.g., the date mailed)
  • To pay the initial Cobra premium − 45 days after making the Cobra election
  • To pay subsequent monthly Cobra premiums − 30 days after the premium due date (usually the first of the month).

Because the outbreak period is disregarded when applying these Cobra deadlines, a qualified beneficiary could have up to 60 days after the end of the outbreak period to elect Cobra, then 45 days after that to pay the initial premium.  To illustrate the effect of the outbreak period on the Cobra election process, consider the following examples, all of which assume the Cobra election notice is timely provided to the qualified beneficiary and the President declares December 31, 2020 as the end of the national emergency − so the outbreak period ends 60 days later on March 1, 2021.

  • If a qualifying event occurs during the outbreak period, the deadline for the qualified beneficiary to elect Cobra is April 30, 2021 (60 days after the outbreak period ends).
  • If a qualifying event occurs before the outbreak period and the Cobra election period begins on February 1, 2020, 29 days of the 60-day election period will have passed before the outbreak period begins. After the outbreak period ends, the qualified beneficiary will have 31 days remaining in the election period, for a deadline of April 1, 2021 to elect Cobra.
  • A qualified beneficiary elects Cobra and timely pays the initial Cobra premium before the outbreak period begins. No other monthly premiums are paid.  The first monthly premium following the initial premium is due March 1, 2020, which coincides with the first day of the outbreak period.  No premiums are paid during the outbreak period nor are they due.  Premiums for all months during the outbreak period will be due on March 31, 2021 (30 days after the outbreak period ends) in order for the qualified beneficiary to have coverage during the entire outbreak period.

Because of the outbreak period, the time between a qualifying event and an election of Cobra can be lengthy.  This allows qualified beneficiaries to “wait and see” if their medical expenses over an extended period of time exceed the cost of the Cobra premiums they would owe.  This is a long time for the plan to be in limbo over Cobra.  Qualified beneficiaries who timely elect Cobra after the outbreak period may have retroactive coverage extending over many months.  While this extension is good for qualified beneficiaries, it increases the likelihood of adverse selection of Cobra coverage.

Cobra administration must continue despite being in limbo.  The relief provided due to COVID-19 effectively pauses or tolls deadlines for the duration of the outbreak period.  Other than that, the Cobra process should continue as it ordinarily would.  For example, plans generally have one of two ways to treat coverage of qualified beneficiaries during the Cobra election period:

  • The plan provides coverage, subject to retroactive cancellation if Cobra is not timely elected or the premium is not timely paid.
  • The plan does not provide coverage, but the qualified beneficiary is subject to an instatement of coverage retroactively if Cobra is timely elected and the premium is timely paid.

It is important for plans and claims administrators to be vigilant about monitoring Cobra during the outbreak period and responding appropriately to coverage inquiries by providers, just as they would during the standard 60-day election period.  Respond to provider inquires by explaining  whether coverage is provided or not during the outbreak period prior to a timely election and premium payment.  The DOL/IRS action does not provide a special rule for coverage during the outbreak period, so this depends on how the plan ordinarily treats coverage during the Cobra election period – whether it provides coverage subject to retroactive cancellation or doesn’t provide coverage subject to retroactive instatement of coverage.  This must also be monitored and communicated to providers during the payment periods after Cobra is elected.

While the focus of this blog is on the Cobra election and premium payment extensions, these are not the only Cobra deadlines extended by the DOL/IRS action.  The outbreak period is also disregarded for the time during which a qualified beneficiary must notify the plan administrator of a qualifying event or determination of disability.

The DOL/IRS notice provides some timing relief to the plan/claims administrator as well:  the outbreak period is disregarded for time period during which the plan/claims administrator must provide a timely Cobra election notice to a qualified beneficiary.  Despite this extension, plans should consider providing the election notice after a qualifying event as it would under the standard timing rules, for two reasons:  to minimize the period of time after the outbreak period ends for Cobra elections to be made, and to avoid the administrative burden of sending election notices to a large number of qualified beneficiaries at the same time.  Be sure to attach a supplement to the standard Cobra election notice that explains the extended deadlines due to the outbreak period.

So, Cobra administration continues during the lengthy outbreak period, more or less as usual but with enough of a twist to complicate established procedures.

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