The COVID-19 pandemic is causing headaches for COBRA administrators.
In response to the pandemic, COBRA deadlines have been extended. Under a new rule, an Outbreak Period starts on March 1, 2020 and ends 60 days after the announced end of the National Emergency or “such other date announced by the Agencies in a future notification.” This Outbreak Period must be disregarded when determining the election period for COBRA continuation coverage and the date for making COBRA premium payments.
Back in December, we warned that this could lead to an avalanche of COBRA claims because beneficiaries could elect to enroll in COBRA coverage months after first becoming eligible, and then their coverage would be retroactive.
Now we’re seeing that this concern may just be the beginning.
Emerging COBRA Issues
An article written by Alexandra Lugo, Esq., lists several problems that group health plan sponsors and third-party administrators have faced during the Outbreak Period. This includes cases of beneficiaries electing retroactive COBRA coverage months after becoming eligible and after incurring significant claims. This can create an uncertain environment for the self-insured groups that end up having to pay these claims.
Another emerging issue involves COBRA beneficiaries incurring claims after electing COBRA and then failing to pay premiums, resulting in confusion surrounding the plan’s responsibility toward these claims.
Because premium deadlines have been tolled during the Outbreak Period, many employers are uncertain regarding when they can terminate COBRA coverage. SHRM provides two basic ways of approaching this issue. In one approach, employers can continue coverage and then retroactively cancel coverage if the premium is not paid. In the second option, employers can cancel coverage and then retroactively reinstate it if the premium is paid.
When Will the Outbreak Period End?
Right now, there is significant confusion regarding premiums, claims and COBRA coverage. Employers and third-party administrators are likely looking for the light at the end of the tunnel.
It’s been about a year since the Outbreak Period started. When will it end?
The answer is complicated.
The Outbreak Period is supposed to end either 60 days after the end of the National Emergency or 60 days after another date that is established for this purpose.
But according to Groom Law Group and SHRM, the National Emergency could refer to either the Stafford Act declaration or the National Emergencies Act declaration. Additionally, there are provisions in ERISA section 518 and Code section 7508A that could limit the toll on COBRA elections to a period of one year – meaning that it’s possible we’ve just about reached the deadline.
The Department of Labor recently issued ESBA Disaster Relief Notice 2021-01 to address this. Based on the one-year limit, the extension will end one year from the date the individual was first eligible for relief. For someone who became eligible on March 1, 2020, the end of the extension would be February 28, 2021.
An Administrative Burden for Compliance
The extension has already created headaches for those involved in COBRA administration. With the one-year limit extending on an individual basis, more compliance headaches are likely coming.
The DOL also states that plan fiduciaries should make reasonable accommodations and minimize the risk of loss of benefits. For example, if “the end of the relief period for an individual action is exposing a participant or beneficiary to a risk of losing protections, benefits, or rights under the plan, the administrator or other fiduciary should consider affirmatively sending a notice regarding the end of the relief period.”
New legislation could create additional changes. According to the Center on Budget and Policy Priorities, the COVID-19 relief package currently being considered includes a provision that would provide federal funding to cover 85% of COBRA premiums. If passed, this may encourage more people to elect COBRA coverage.
This is a challenging time for employers and third-party administrators. Travisoft can make it easier with tools for COBRA administration, ACA reporting, retiree billing and more. Request a demo to see our technology in action!