Department of Labor, IRS Issue Joint Rule Extending COBRA Deadlines as Well as New Model COBRA Notices
By Janet Stewart, Rob Gilmore & Alan Rauss
It is undeniable that the U.S. economic landscape looks markedly different than it did only a few months ago due to the novel coronavirus (COVID-19) and the resulting global pandemic. Fortunately, the Department of Labor and the IRS have taken notice and have made some adjustments to the Consolidated Omnibus Budget Reconciliation Action of 1985 (COBRA) temporary continuation coverage to aid employees, employers and group health insurance plans.
Indeed, since the onset of COVID-19, the stock market has drastically fluctuated, ultimately losing most all of its gains from the past few years. Businesses have been temporarily (and sometimes permanently) shuttered as a result of various statewide stay-at-home orders. And unemployment has skyrocketed, as those same businesses have been forced to react to their rapidly declining revenues and an uncertain economic future.
As a result, the millions of Americans who are now unemployed or facing substantially reduced hours are, in many ways, taking a double financial hit. Not only is the sudden loss of regular income devastating, but the loss of group health insurance benefits is also critical, especially in light of the ongoing pandemic.
While, pursuant to COBRA, temporary continuation coverage could be available to those who were already enrolled in group health insurance benefits at the time of termination or reduction in hours (Qualified Beneficiaries), the transition can already be confusing, even in the best of times.
To further complicate matters, there are also various timing requirements imposed upon Qualified Beneficiaries to make an election, provide requisite notice of a qualifying event to their group health insurance plan and to pay certain COBRA premiums. Likewise, there are also various timing requirements imposed upon employers and group health insurance plans to comply with certain notice provisions in connection with COBRA continuation coverage. For Qualified Beneficiaries, failure to meet said timing requirements could result in the loss of the ability to receive COBRA continuation coverage or lapse in coverage, and for employers and group health insurance plans, the same could result in possible exposure to litigation.
In light of the difficulties and unprecedented circumstances imposed by COVID-19, the U.S. Department of Labor—in conjunction with the Internal Revenue Service—recently issued a Joint Rule in addition to certain other notices and guidance in order to extend a number of these timing requirements for the period from March 1, 2020 (i.e. the commencement of the National Emergency due to the COVID-19 outbreak) through until at least 60 days after the announced end of the period of the National Emergency (collectively, defined as the Outbreak Period). The result of the Joint Rule, as well as the other notices and guidance, is to, in effect, carve out the Outbreak Period for purposes of determining compliance with the applicable timing requirements in connection with COBRA.
Thus, where a Qualified Beneficiary would usually have only 60 days following the furnishing of an election notice or the expiration of coverage (whichever is later) to enroll in COBRA continuation coverage, the Joint Rule would extend the calculation of this timeframe to exclude the Outbreak Period. The same is true, in relevant part, as it relates to the date for Qualified Beneficiaries to make premium payments under COBRA following enrollment, the date for individuals to notify the group health insurance plan of a qualifying event, the date for an individual’s special enrollment in a group health insurance plan and the date for group health insurance plans to provide the requisite election notice to a Qualified Beneficiary for purposes of enrolling in COBRA continuation coverage.
By way of example only, if the National Emergency had been declared over on April 30, 2020, then as a result, the Outbreak Period would be defined to end on June 29, 2020 (i.e. the 60th day following the end of the National Emergency). Therefore, a Qualified Beneficiary who had experienced a qualifying event (such as a requisite reduction in hours or job loss) and had received an election notice on April 2, 2020 would, under the Joint Rule, now have until Aug. 28, 2020 (i.e. 60 days following the end of the Outbreak Period) to elect COBRA coverage. In contrast, prior to the Joint Rule, the same Qualified Beneficiary would have only had until June 1, 2020 to elect COBRA coverage.
Ultimately, the goal of the Joint Rule, in addition to the other notices and guidance, is to ease this transition as it relates to health insurance coverage for the millions of Qualified Beneficiaries who are suddenly finding themselves unemployed or with reduced hours, by preserving and extending their ability to enroll in and receive COBRA continuation coverage. The goal is the same for employers and group health insurance plans: to ease the transition in light of the present National Emergency by loosening the requisite notice timeframes.
Notably, the U.S. Department of Labor also recently issued new model notices that group health insurance plans can use in order to satisfy the various notice requirements to Qualified Beneficiaries in connection with COBRA. The new notices include an updated version of the model general notice and an updated version of the model election notice. Once again, the purpose of these updated notices is to ease the transition for the Qualified Beneficiaries. Indeed, the new model notices have been updated with additional information in an effort to provide Qualified Beneficiaries with a more robust understanding of the various options, elections and timing associated with their post-separation coverage, including as it relates to the interaction between Medicare and COBRA.
As such, employers and group health insurance plan administrators should review their current COBRA forms, notices and guidance in order to ensure compliance. In addition, communication with plan participants and Qualified Beneficiaries in order to give notice of these unprecedented new rights and standards under COBRA is critical to avoid possible costly repercussions down the road.
At KJK, we are also here to help you ease this transition. For questions on these adjusted COBRA rules and new notices, as well as best practices for navigating and implementing the same, please contact Robert S. Gilmore (rsg@kjk.com), Alan M. Rauss (amr@kjk.com), or another member of our Labor & Employment team by calling 216-696-8700.